Thanks Kuya Mike for alerting us to this situation first thing in the morning in such an entertaining way.

HAHAHAHAHAHAHAHAHAHAH @KPMG @KPMG_US YALL SUCK HAHAHAHAHAHAHAHAHAHAH@going_concern https://t.co/EpdKyBEw6g

— Kuya Mike UNHINGED (@KuyaMikeDG) November 25, 2024

What happened, according to NYT:

Macy’s said on Monday that an employee had misstated up to $154 million in delivery expenses over the past few years, forcing the retailer to delay a much-anticipated earnings report that Wall Street uses to gauge the strength of holiday shopping.

Macy’s sales in the third quarter fell 2.4 percent — below analysts’ expectations — to $4.74 billion. The company’s overall sales were dragged down by weak performance at Macy’s stores and its digital business.

Macy’s said it had found the accounting error while preparing its results for the quarter, which ended Nov. 2. The results had been set to be released on Tuesday. An investigation was opened, and the employee, who was responsible for small package delivery expense accounting, is no longer with the company, Macy’s said. The investigation has not identified involvement by any other employee.

KPMG has audited Macy’s since 1988.

In San Jose, PwC insists it didn’t ply a partner with alcohol before said partner crashed his Tesla into a chef at 130 MPH:

A Los Gatos partner for consulting and accounting giant PwC was drunk and speeding on Highway 85 at 130 mph just before his Tesla slammed into the back of a young San Jose man’s car, permanently injuring the 22-year-old chef, a new court filing in a lawsuit over the crash alleged.

Crash victim John Cooper sued PwC partner Ousmane Caba and the company in March, claiming Caba was so drunk he was “barely conscious” when he left San Francisco in June 2023 after a day and night of drinking at events sponsored by PwC.
Caba could not be reached for comment. Messages left for his lawyer were not returned.

PwC, accused in the lawsuit of negligence, did not respond to a request for comment. The company in a court filing last month said evidence produced in the case does not show that PwC paid for “drink after drink” for Caba.

“Instead, it shows that PwC invited employees to two meal events the day before the incident which were catered by others and which included food and beverage selections available to all attendees,” the filing said. “There is nothing vile or despicable associated with offering alcoholic beverages at gatherings in any context, whether business or social.”

That last part doesn’t seem like something a company should say when one of their partners gets trashed and nearly kills someone on the road. But OK, I’m not a lawyer.

EY rolls out ‘metaverse’ avatars, as if video interviews weren’t bad enough already.

A link to the AI-powered avatar, called eVe, is sent out to candidates as soon as they are selected to advance to the interview stage. eVe can answer questions about the company and help candidates prepare for their interview with a real person, according to Francesca Jones, an early careers leader at EY.

The AI avatar, which appears on the screen as a real person would during a video chat, can be spoken to directly and offers verbal answers back within moments, mimicking an actual conversation. It can also be used with text like other chatbots.

In testing, interns grilled the GPT-4 chatbot more than TPTB expected they would:

“I was amazed by the types of questions they asked and how much time they actually spent with it,” Domhnaill Hernon, global lead of EY’s Metaverse Lab, told Business Insider. He suspected the younger generation might spend two to three minutes with eVe and then move on, but they were regularly spending 15 to 20 minutes engaging with it conversationally, asking questions and follow-ups.

One intern who spent 25 minutes talking to eVe went into extreme detail evaluating EY’s compensation benefits, particularly comparing the company’s pension plan to its 401K offering.

Ask it if it prefers waffles or pancakes!

In case you hadn’t heard, PE-backed Aprio is making moves in California.

Aprio, an Atlanta-based advisory and accounting firm, recently purchased Kirsch Kohn & Bridge (KKB) in Woodland Hills to continue its expansion efforts in the region. Terms of the deal were not disclosed.

“Southern California is an economic powerhouse with diverse industries, a robust entrepreneurial spirit and a dynamic business community,” Aprio Chief Executive Richard Kopelman said. “This expansion reflects Aprio’s commitment to building a stronger West Coast presence and serving our clients where they are.”

Aprio previously made moves in San Francisco and Walnut Creek and views this latest acquisition as an opportunity to dig into prominent Los Angeles industries like construction, manufacturing, retail, real estate and professional services.

How’s everyone doing at Aprio these days anyway? Last we heard things weren’t so great. Let us know if you have some scoop on the ground.

PwC makes a Business Insider list of major US companies to slash staff this year. The blurb includes the statement PwC made to BI when the October layoffs were reported in September:

In an emailed statement to Business Insider, Tim Grady, PwC’s US chief operating officer, said, “To remain competitive and position our business for the future, we are continuing to transform areas of our firm and are aligning our workforce to better support our strategy, including attracting and moving the right talent and skill sets to the areas where we need them most. Right now, we are focused on running our business well and adapting to meet the needs of our clients and the rapidly changing market.”

Related:

University of Northern Iowa brags about its CPA exam performance:

Continuing its streak of success, the UNI Accounting program was ranked sixth amongst mid-sized schools for single-pass rates of the certified public accounting (CPA) exam by the National Association of State Boards of Accountancy (NASBA).

This specific ranking doesn’t encapsulate all four sections of the CPA exam that prospective accountants must take, but UNI has submitted all four sections to the NASBA. Out of the top ten institutions ranked in this category, UNI claims the most candidates and the most sections taken by candidates, with 51 candidates completing the CPA and 175 sections total. UNI’s CPA pass rate for the 2023 CPA exam is 78.3%, with the average passing rate being 79.3%.

I really wish I hadn’t thrown away my old CPA exam performance books from the 2010s in a decluttering spree the other weekend because I would have loved to compare 2011 to now. 51 candidates doesn’t feel like much of a brag but to be fair, they did say mid-sized schools.

Across the pond, federal tax changes will mean PwC UK partners will be taking a hit:

Big Four partners think of themselves as more than just employees. The top ranks of the world’s biggest accountancy firms jointly own and manage their firms — and share in its profits at the end of the year. These payouts can run into the millions of pounds each year.

But those rewards will now be hit by the sizeable increase in employers’ national insurance contribution (NIC) announced by Rachel Reeves in last month’s budget.

PwC, the UK’s biggest auditor, is paying an extra £35,000 in employer’s NIC for each of its 1,030 partners. That means that Britain’s biggest auditor will see its tax bill increase by nearly £36 million because of the changes. And, as its partners share in the firm’s profits at the end of the year, they will end up paying for the increased cost eventually.

That’s all I’ve got for today. Grant Thornton layoff story is on deck, I neglected to get to it Friday when tips came in and got scooped by WSJ, ugh. We’ve got some extra details to share though.

Although it’s a holiday, we’re still lurking around so feel free to reach out via email or text if you’ve got a tip.

Happy Turkey Day! Be safe.

The post Monday Morning Accounting News Brief: PwC Denies It Got DUI Partner Drunk; KPMG Misses a Huge ‘Error’ | 11.25.24 appeared first on Going Concern.

Audit

Large Accounting Firms Will Have to Submit Financial Statements to U.S. Regulator [Wall Street Journal]
Large accounting firms will have to submit financial statements annually to the U.S. audit regulator for the first time, among new requirements that have faced pushback from auditors but have received support from many investors The Public Company Accounting Oversight Board on Thursday voted 4-1 to bolster the rules around firms’ reporting annually and for special circumstances, such as a filed lawsuit or private-equity investment. The U.S. audit watchdog also voted 4-1 on a separate rule to require hundreds of firms to publicly disclose a set of eight metrics, ranging from auditor turnover to partner involvement, workload and work experience.
PCAOB news release here: https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-adopts-new-requirements-to-standardize-disclosure-of-firm-and-engagement-metrics-and-to-modernize-the-pcaob-s-reporting-framework

DLA Finance pursues artificial intelligence to pass financial audit [Defence Logistics Agency]
The Defense Logistics Agency deputy chief financial officer is exploring the power of artificial intelligence to accelerate the agency’s path to a clean financial audit. “Although we’re at the beginning stages of using AI in finance, we believe there’s a lot of potential. We’ve already had success with technology such as bots and robotics process automation. We plan to build on that with AI,” Shawn Lennon said. AI can transform DLA’s progress by loading policies, data, process documents and more into a searchable large language model for easy, fast retrieval. The goal is to input data from DLA’s business systems and use AI to detect errors, generate insights, and propose solutions to improve data quality and financial reporting, Lennon added.

Supermicro hot-swaps auditor in hope of dodging Nasdaq delisting [The Register]
Server maker Supermicro has appointed a new independent auditor and submitted a compliance plan to the Nasdaq stock exchange to avoid being delisted amid reports it is losing customers because of uncertainty over its future. The San Jose-based hyperscaler supplier has engaged BDO USA, the American arm of one of the top five global accounting operations, as its auditor with immediate effect. This latest move follows the earlier resignation of Ernst & Young, which previously served as Supermicro’s auditor, over concerns about the company’s accounting practices. The server biz was also more than two months late in filing its 10-K annual report and was at risk of being delisted from Nasdaq as a consequence.

Long Reads

The rehabilitation of KPMG [Financial Times]
At Legal & General’s annual meeting in May 2022, a shareholder took to the floor to air some grievances — not about the performance of the FTSE 100 insurer but that of KPMG, its auditor. “Don’t we as a company with an enormous reputation deserve to have auditors of the very highest reputation too,” he asked the group’s board. Referencing press coverage of KPMG’s multiple audit failings, he also questioned whether L&G should “ditch them and get someone else to do that work”. The remarks generated applause in the room and illustrated the extent to which the reputation of the accounting and consulting firm had been damaged by a litany of scandals in the preceding years.

News

In major victory for AICPA, judge rules against paid overtime for accountants and other professional workers [Reddit]
Sayeth r/accounting, “Fuck the AICPA.”
Most notable comment:
“Apparently the AICPA deleted their anti-overtime advocacy page in the last month but here is the archived version: https://web.archive.org/web/20240831222059/https://us.aicpa.org/advocacy/cpaadvocate/2016/aicpa-reacts-to-dol-overtime-rule EDIT: Here’s a more detailed letter they still have posted- https://us.aicpa.org/content/dam/aicpa/advocacy/issues/downloadabledocuments/aicpa-letter-to-dol-overtime-rule-rin-1235-aa11.pdf“

Billionaire Luksic Family Seeks €217 Million From Santander, PwC [Bloomberg]
Chile’s billionaire Luksic family is seeking €217 million ($226 million) in compensation from Banco Santander SA, PriceWaterhouseCoopers LLP and others in connection to the collapse of a Spanish lender seven years ago. Aeris Invest, a Luxembourg-based financial holding company owned by South America’s second wealthiest family, is demanding the payment to cover losses incurred as shareholders of Banco Popular, after the lender went bankrupt and was taken over by Santander in 2017, according to legal documents seen by Bloomberg.

Trump win, interest rate cuts could spur M&A spike next year: EY [CFO Dive]
Merger-and-acquisition activity could pick up next year thanks to pent-up demand and interest rate cuts, as well as deregulation efforts expected in the incoming Trump administration, according to Ernst & Young’s latest monthly report on deal activity. “With Trump having secured a decisive victory, investors will be weighing the impact his proposed economic and regulatory policies could have,” the report said. “Determining the deal momentum in the longer term will likely depend on how much of Trump’s tax, energy, trade and regulatory agenda is enacted.”

CapRadio releases audited 2024 financial reports, revealing $10M in debt and its repayment plans [CapRadio (Sacramento)]
Capital Public Radio management released audited financial statements for the 2023-24 fiscal year on Thursday, revealing roughly $10 million in debt. CapRadio’s Chief Marketing and Revenue Officer Chris Bruno called the report a “standard annual financial audit” in a media briefing earlier this week. He added that it is the first opportunity for people to review the station’s audited financial data — and its efforts to dig itself out of a major hole — after two previous audits found severe financial mismanagement and significant debt. After an initial audit was released in September 2023 and found significant accounting problems, Sacramento State took over CapRadio’s financial operations. The university worked with the station over the past year to prepare its financial statements for the audit released on Thursday. The most recent financial statements were audited by CliftonLarsonAllen, the same accounting firm which released a forensic analysis of CapRadio’s finances in August. (That report found the station made roughly $760,000 in unsupported payments between July 2020 and June 2023, a large portion of which went to the station’s former General Manager, Jun Reina.)

Talent

Accountants ramp up offshoring to bring down costs [Financial Review]
We’re doomed.
Up to a third of staff at some of the nation’s top accounting firms are located offshore and leaders say the trend will only accelerate as they seek to cut costs and deliver work more quickly. The Australian Financial Review Top 100 Accounting Firms list for 2024 shows countries such as India and the Philippines have become key hubs for preparing the tax returns and financial reports of corporate Australia, including high-level, potentially sensitive work.

A Great Resignation 2.0 is simmering as employees feel overworked and underpaid, forcing them to look for greener pastures [Fortune]
Firms would love for this to be true. The sooner you leave, the sooner they can replace you with 5 Indians.
More people are now mulling their options as they increasingly feel overworked and underpaid amid relentless cost pressures. Employees feel so bogged down by work that far more people are considering resigning now than during the mass resignations we saw in 2022, auditor PwC found in its Global Workforce Hopes & Fears Survey published earlier this year, covering over 56,000 workers worldwide. The report, with nearly half of its respondents being millennial, followed by Gen X and Gen Z employees, found a staggering increase of 28% in the number of people who plan to change jobs, compared to 19% during the Great Resignation in 2022.

Dozens of partners take early retirement from accountancy giant PwC [Sky News]
Sky News has learnt that PwC’s 1,030 UK partners were notified earlier this week that a larger-than-usual round of partner retirements would take place at the end of the year. Sources said the round would involve several dozen partners – who command average pay packages of about £1m – leaving the firm.

Attention firms looking to hire: Check out this week’s Top Remote Accounting Candidates from Accountingfly. You might find your next great hire! If none of these professionals tickle your fancy, sign up for Always-On Recruiting to get a fresh batch in your inbox every week.

Law & Order

Broward tax preparer used credit card fraud scheme to steal from seniors: AG [6 South Florida]
A Broward tax preparer is facing dozens of charges after authorities said he ripped off seniors and others by using their personal identification to open credit card accounts. Ricardo Karns, 38, was arrested by the Broward Sheriff’s Office Wednesday on 41 charges including money laundering, organized scheme to defraud, grand theft and criminal use of personal identification, jail records showed.

Charlotte repairmen plead guilty to $1.5M+ in tax fraud: DOJ [Queen City News]
Court records stated that from 2018 through 2021 both men worked as home repairmen and provided car repair services to elderly customers. The two men received over $1.5 million from customers and failed to report the income on tax returns. They did various jobs ranging from roofing to driveways.

Ex-Employee Says BDO Fired Him in Retaliation For Fraud Concerns [Bloomberg Law]
A former employee has sued BDO USA PC in federal court alleging retaliation in violation of the New York Labor Law and defamation. Cornel Lupu alleges that during his employment as a managing director at BDO, he uncovered fraudulent billing practices within the company’s unclaimed property practice. He reported his concerns about these practices to his supervisors, but they were dismissed, his complaint, filed in the US District Court for the Southern District of New York, says.

Ex-PwC Partner Blames Tax Scandal Fall-Out on Leaders’ Failures [Bloomberg Tax]
A former Pricewaterhouse Coopers Australia tax partner has hit back against a claim brought by the firm which alleged he was responsible for the tax scandal that has plagued PwC for two years. It’s the latest in a legal fight between Paul McNab and PwC over post-termination payments denied to him, which was filed in the New South Wales Supreme Court in January. PwC’s cross-claim in the case, filed Nov. 14, alleged McNab caused “identifiable loss and damages” for the cost of investigations and inquiries into the leaking of confidential government tax information, “and the loss of all value in PwC’s government business which was sold to private equity fund Allegro Funds in a $1 distressed sale”. PwC’s cross-claim alleged the damage McNab caused the firm outweighed any partnership payments it may owe him.

AI

KPMG Invests $100M in Google Cloud Alliance to Accelerate Enterprise Adoption of AI for Clients [KPMG]
KPMG LLP and Google Cloud today announced a major expansion of their U.S. alliance focused on advancing generative AI, data analytics, and cybersecurity among Fortune 500 companies and global enterprises. KPMG will make a landmark $100 million investment in its Google Cloud practice, which KPMG estimates will drive $1 billion in incremental growth for the firm. Bookings for KPMG’s Google Cloud practice have increased by 10x in the past two years.

Bryant launches PwC AI in Accounting fellowships with $1.5M investment [Bryant University]
Bryant University announces the launch of the PwC AI in Accounting Fellowship program, funded by a $1.5 million investment from accounting firm PwC US and its partners who are Bryant University alumni. This cutting-edge experiential learning initiative offers undergraduate students a unique opportunity to explore the transformative impact of artificial intelligence on the accounting profession.

Academia

One CPA’s Experience in a Doctorate in Business Administration Program [CPA Journal]
In this personal reminiscence, one accounting professor recounts her journey from public accounting into academia. Rather than taking the usual PhD, she took the sometimes overlooked path of a Doctorate in Business Administration (DBA). Her story shows that there is more than one way to answer the call to impact: CPAs who want to make a difference have more than one option available.

The post Friday Footnotes: PCAOB Demands More Tedious Paperwork From Firms; PwC Partners Retire Early; KPMG Redeems Itself? | 11.22.24 appeared first on Going Concern.

Was the mid-tier firm about to announce a private equity deal discussed last week PKF? Because they announced this morning.

PKF O’Connor Davies (“PKFOD”) (“the Organization”), one of the nation’s largest accounting, tax and advisory practices, is pleased to announce a strategic growth investment from Investcorp, a leading global alternative investment firm, and Public Sector Pension Investment Board (“PSP Investments”), one of Canada’s largest pension investment managers. This transaction represents a significant milestone for PKFOD, adding two experienced investors that will help fuel growth and expand service offerings to enhance the overall client experience.

The Pentagon has failed the 7th audit in a row:

After the close of business Friday night, the Pentagon released the findings of its fiscal 2024 annual audit. And for the seventh consecutive year, it has failed, though claiming incremental improvements.

“This result was not a surprise, and I know that on the surface it doesn’t sound like we’re making progress. However, that is not the case,” Michael McCord, the Department of Defense Under Secretary of Defense and Chief Financial Officer, told reporters today. “I believe the department has turned a corner in its understanding of the challenges, and more importantly, in addressing those challenges, momentum is on our side.”

Here’s the DOD discussing it directly.

To date, the only military branch to ever receive a clean audit opinion is the Marines and only the one time (so far).

TIL Trump AG pick Matt Gaetz has a wife who works at KPMG:

Despite Matt Gaetz’s scandal-plagued background, he stands poised to assume one of the most prestigious positions in the federal government. President-elect Donald Trump tapped the former Republican congressman to serve as U.S. attorney general in his second administration, a decision that shocked politicians from both parties. One of the loudest cheers for the decision came from Gaetz’s wife, Ginger Luckey Gaetz; on her X (formerly Twitter) account, she wrote, “Attorney General will look good on you my love.”

Married to Gaetz since August 2021, Lucky Gaetz is proud to be both a “wifey” and an accomplished analyst for KPMG, a major multinational accounting organization. Success runs in her family: She’s also the sister of Palmer Luckey, who became a billionaire thanks to Facebook’s acquisition of the virtual reality company he founded. Luckey Gaetz is a committed Christian who references Bible passages in her social media profiles; when her husband was named AG pick, her X reaction was simply “God is good.”

A little tidbit from The Australian Financial Review Top 100 Accounting Firms list for 2024:

Accounting firms that use artificial intelligence grew an average of 50 per cent faster than firms that did not report using the technology.

Senator Joni Ernst (no relation to Ernsts Alwin C. and Theodore, we assume) is still on the hunt for naughty IRS employees, reports Washington Examiner:

Over 800 Internal Revenue Service employees still owe millions in back taxes despite heavy criticism from Sen. Joni Ernst (R-IA), who is hoping the level of tax waste will be squashed by billionaire Elon Musk, the newly tapped co-leader of the Department of Government Efficiency.

In a letter to the Iowa senator sent on Nov. 8 and shared exclusively with the Washington Examiner, the IRS noted that of the 2,044 employees who reported having balances totaling more than $12 million, 860 employees still have not paid overdue taxes. Only 20 of the 70 employees who “willfully evaded” paying their taxes were removed.

“We haven’t seen a tax revolt like this since the Boston Tea Party,” Ernst said in a statement. “If hardworking Americans dodge taxes, they are faced with steep fines and imprisonment, but it appears that tax collectors in Washington believe those rules are for thee but not for me.”

Earlier:

A Deloitte survey reveals that almost half of Americans headed on holiday this season will be doing some work while they do:

About 49% of employed travelers are “laptop luggers” — those who plan to work at some point on their holiday vacation — up from 34% last year, according to the Deloitte holiday travel survey.

This flexibility allows workers to take trips they might not otherwise, or stretch their trips for longer, according to the survey.

While there are more laptop luggers across most age groups and income levels, Gen Zers, which Deloitte defines as those born between 1997 and 2012, and high earners make up the highest shares, at 58% and 52%, respectively, according to the survey.

fLeXiBiLiTy

In another Deloitte survey we hear from young people who care less about the environment and more about being able to pay the fucking rent:

Deloitte surveyed a weighted sample of 300 people aged 20 to 29, and 200 people aged 30 to 41.

Personal financial stability was the top concern for respondents, overtaking climate change. Fears of terrorism, war or sexual harassment also ranked higher than climate change among top concerns for Millennial and Gen Z.

Among Gen Z, 44% find stress levels at work too high, compared to 59% of Millennials.

Sal Melilli, Partner with KPMG Private Enterprise, will be ringing NASDAQ’s closing bell this afternoon to celebrate the 2024 KPMG Private Enterprise Global Tech Innovator Competition and National Entrepreneur’s Day.

That’s all I saw of note floating around out there in the accounting news sphere this morning. If you see something interesting, have a tip, or just want to vent do feel free to email or text. All tips are anonymous.

Have a great week!

The post Monday Morning Accounting News Brief: Way Too Many People Working on Vacation; PKF Does a PE Deal | 11.18.24 appeared first on Going Concern.

Long Reads

Deloitte held close ties to a now-sanctioned Cyprus firm accused of shielding oligarchs’ wealth, records reveal [International Consortium of Investigative Journalists]
In March 2023, amid a wartime clampdown on secretive Russian financial networks around the world, the accounting giant Deloitte publicly denied having any recent affiliation with an obscure financial firm in the Mediterranean republic of Cyprus. The firm, MeritServus, was on the verge of being sanctioned by British authorities for helping hide assets tied to a key billionaire close to Russian President Vladimir Putin. “Since 2005, MeritServus has not been part of, or affiliated with, Deloitte Cyprus or any other Deloitte firm,” the accounting firm told The Guardian. Deloitte had good reason to make the statement: MeritServus had started as a division of Deloitte in Cyprus and was now coming under intense scrutiny from media and regulators. But Deloitte’s statement masked more than a decade of the two firms’ official business relationship, according to corporate filings in Cyprus and leaked email exchanges.

What we now know about large accounting firms, and what we don’t [The Mandarin]
The accounting profession is currently the focus of lawmakers trying to work out how best to legislate to improve professionals’ behaviour and minimise harm to the community following PwC Australia’s much-publicised breach of confidentiality almost a decade ago. The PwC tax leaks saga that blew up in January 2023 has seen a revisitation of old debates about the accounting profession, management of conflicts of interest, government consultation with experts, breaking up or refashioning business structures, and defining what firms can do for audit clients. What anyone without a sense of history needs to appreciate is that the world’s toughest regulators have tried to tackle these issues for years. There are no easy solutions.

Audit

Is Anyone Crazy Enough to Audit Super Micro Computer? [Wall Street Journal]
Super Micro Computer’s stock has been in a tailspin since Ernst & Young dumped the company as an audit client about a year after it replaced Deloitte & Touche. If EY found something that Deloitte missed then the situation could get even trickier for the server maker that once seemed unstoppable. There are enough red flags that Deloitte should be trying to find out what happened.

The Profession

The problems PE solves [Accounting Today]
Accounting Today is just full on jerking off private equity now. This will age like milk:

Firm Watch

Cover & Rossiter ‘goes big’ with Bonadio merger [Delaware Business Times]
Cover & Rossiter offers audit, tax and trust services as well as financial planning to clients as well as accounting services to small to medium businesses. Holliday said that joining Bonadio Group is a natural progression for the firm to evolve as accounting firms faced headwinds during the COVID-19 pandemic. When Paycheck Protection Program (PPP) loans and Emergency Injury Disaster loans (EDIL) were issued to thousands of businesses in the state, Cover & Rossiter had to quickly rise to meet the needs to ensure the paperwork was on point. “When the pandemic hit, the pressure was really on and we had to rapidly pivot to deal with those programs and, as a smaller firm, we didn’t necessarily have the bandwidth,” MD Marie Holliday told the Delaware Business Times. “I also feel there’s a shortage in accountants, as we compete against banks and trust companies, so it got harder over time to keep talent. With artificial intelligence coming in, it became clear we couldn’t handle this on our own. So we thought, ‘We have to go big or go home.'”

Aprio Expands to Southern California with Addition of Kirsch Kohn & Bridge [PR Newswire]
Aprio announces its expansion to Southern California with the combination with Kirsch Kohn & Bridge (KKB), located in Woodland Hills, Calif. Effective November 1, 2024, KKB joined Aprio, adding five partners and more than 30 professionals.

Accounting firm KSM announces move to new nearby office [IBJ]
Katz Sapper & Miller—the largest accounting firm in Indianapolis—plans to relocate to a new office in mid-2026 in a move that KSM says represents its embrace of post-pandemic work habits. “I think there’s a benefit to being in the office, and the purpose of the design is to enhance the office experience,” CEO Tim Cook said. “We’re trying to create space that reflects how we work today, versus maybe how we did five or 10 years ago.”

Talent

Attention accounting employers: If you need talent, you need to check out Accountingfly’s top remote accounting candidates of the week. If you don’t like any of these, sign up for Always-On Recruiting to get a fresh batch in your inbox every week. It’s FREE!

Chicago’s largest accounting firms see decreasing headcounts among major players [Crain’s]
Crain’s pinned this on the accountant shortage but anyone with half a brain knows that’s bullshit. Kindly do the needful and show us how much work these firms are shipping overseas.
The largest accounting firms in the Chicago area, which are ranked by local professional staff as of June 30, barely saw an increase in numbers from 2023 to 2024. These firms saw median growth of less than 1%. The top 25 firms didn’t see much of an increase in local certified public accountant, or CPA, headcounts either, with median growth hovering slightly above 0%.

Addressing the talent shortage in the accountancy profession: Singapore’s strategic initiatives [FutureCFO.net]
The accounting industry in Singapore is experiencing a talent shortage. This is exacerbated by the rapid pace of technological advancement that demands a workforce skilled in both traditional accounting practices and new digital tools. To address these challenges and come up with strategies to ensure a robust pool of accountancy talents, the Accounting and Corporate Regulatory Authority (ACRA) with the support of Singapore’s Ministry of Finance (MOF) has set up the Accountancy Workforce Review Committee (AWRC) in 2022. After 48 meetings and focused group discussions (FDGs) amongst over 300 participants, AWRC has come up with a report highlighting recommendations to build a quality and sustainable talent pipeline for the accountancy profession.

ESG

66% of Young Professionals Feel Responsible for Driving ESG Initiatives: KPMG Report [ESG News]
A recent KPMG International report, Leaders 2050, reveals that young professionals worldwide are feeling disempowered in supporting their organizations’ climate goals. The survey, involving over 800 young people aged 18 to 35 across 48 countries, indicates that while 66% of respondents feel responsible for driving Environmental, Social, and Governance (ESG) impact, only 10% feel they have the autonomy or empowerment from leadership to act effectively.

Only 41% of Global Companies Have a Published Climate Transition Plan: EY Report [ESG News]
The 2024 EY Global Climate Action Barometer reveals that while climate disclosures have improved significantly over recent years, urgent action remains lacking among companies to combat the intensifying climate crisis. Despite an increase in disclosure coverage to 94% and a quality score of 54%, this growth is not sufficient to align with the global climate agenda.

Fraud

West Fargo woman accused of stealing nearly $830K from Fargo employer [KFGO]
According to court records, Mary Peterson was in charge of making cash deposits for Lunde Auto until she was fired in 2022. Her firing came after the general manager learned she had embezzled nearly $830,000 over seven years. The theft came to light in January 2022 when the company’s accounting firm realized a large amount of money was missing from a bank account. An accountant suspected Peterson was stealing from the company after an email exchange with her over a $450 discrepancy.

The post Friday Footnotes: Oh Good, Another Talent Taskforce; A Little Firm Goes Big; Deloitte Being Shady!? | 11.15.24 appeared first on Going Concern.

Deloitte is the first company in Australia to be recognized as a “menopause friendly” workplace:

The accreditation was issued by Menopause Friendly Australia, an offshoot of a UK-based advocacy and advisory organisation which has now launched locally to bring attention to a subject which is still all-too-often ignored.

Deloitte received the badge following a thorough evaluation of its workplace initiatives across five global standards, deemed to have created a “supportive, inclusive, and accommodating environment” for those contending with the natural process.

“We know that menopause and its symptoms can disrupt the ability of our people to thrive in the workplace,” stated Pip Dexter, who has ushered in several major reforms during her time as Deloitte’s chief people & purpose officer. “Because it has largely been a taboo topic until recently, many women fear that disclosing reproductive health issues may negatively impact their careers.”

This is definitely worthy of a deep dive.

Things appear to be turning around at KPMG UK with the firm finally adding some new equity partners:

KPMG has promoted employees to its top ranks for the first time in four years in a bet that demands for its professional services will grow after fighting a sector-wide slowdown.

The Big Four firm has added 42 new “equity partners”, who jointly own and manage the firm, having shrunk the number of partners to a fraction of the size of its competitors.

It is thought the promotions have boosted the size of KPMG’s partnership to more than 500 after its numbers fell to their lowest level since 2002 earlier this year. While it has not promoted internally to its top ranks, it has hired some outsiders to join its partnership.

PwC Australia will be handing over some money to jilted ex-partners, reports AFR:

PwC Australia has entered into settlements worth millions of dollars with two of the eight partners forced from the firm over allegations they were involved or did not adequately address the firm’s tax leak scandal or failed to meet their professional responsibilities.

One of the settlements, worth about $2 million, is with Wayne Plummer, a former senior PwC corporate tax partner and leader of the firm’s tax risk and quality team, according to a source familiar with the arrangements but not authorised to speak about the settlements.

Earlier: Fuel Up the Bus, PwC Australia Has Named and Shamed Eight Partners Tied to the Tax Leak Scandal

After six decades of serving clients, PwC is pulling out of Fiji and forcing its partners to pretend like they’re excited to be working for Grant Thornton instead:

GLOBAL accounting “big four” firm PwC is pulling out of Fiji after 60 years of offering support across Audit & Assurance and Tax services to multiple industries.

In a statement issued this week, the Fiji firm revealed they were parting ways amicably and that it will now join the Grant Thornton network from next month.

“My colleagues and I are delighted to be joining the Grant Thornton network. The Grant Thornton network is located in over 140 markets globally, with over 70,000 people and generates revenues in excess of $US7 billion per annum,” PwC Fiji’s senior partner Jerome Kado said.

“We remain fully committed to providing high quality work to our clients and stakeholders.”

EY bought an HR tech consultancy:

Ernst & Young LLP (EY US) announced today that Jubilant, an award-winning HR technology consultancy focused on implementing and supporting human capital management, payroll and workforce management systems, has joined EY US to further bolster our capabilities in this fast-growing market.

With more than 50 professionals focused on HR technology services, Jubilant has differentiated itself in the market by designing and building accelerators that automate testing for payroll and workforce management, and by delivering advanced tools for data movement, analysis and validation.

Seems the firm is on a buying streak of late. Last month EY announced it would acquire Dignari, LLC, “a woman-owned leading technology consulting firm specializing in digital identity and access management (IAM) solutions.”

In India, an audit manager at EY who divorced her husband after he lost his job sent a legal notice after she saw his fancy new car on social media:

Cut to four years [after divorce], the woman has sent a legal notice demanding Rs 2 crore after he bought a Mercedes C200 and posted a picture and video of it on his social media platform.

Taking to his X handle, the man shared, “My ex-wife (Currently Audit Manager in EY) divorced me when I lost my job after torturing me. A proper MOU was done & money I gave. After 4 years of divorce, I bought a Mercedes C200 & posted a pic on FB. She sent a legal notice demanding 2 crore the same week. This is their nature.”

He also shared a video of his old vehicle and shared, “I bought this Tata Nano XTA which we had when I was married. I lost my job and she became impatient and divorced me after getting money.”

She #divorced him when he lost his job.

4 years, when she knew that he bought a #Mercedes from FB page, she sent a legal notice asking for 2 Crore.pic.twitter.com/BoO5SL5F60

— ShoneeKapoor (@ShoneeKapoor) November 8, 2024

As if you need another reason to hate HOAs:

A former accountant of the Hammocks Home Owners Association has been arrested amid the years-long investigation into the alleged massive theft of funds from the HOA, prosecutors announced Friday.

Jesus Cue, 63, was arrested on charges including racketeering, money laundering, grand theft, unlawful compensation, organized scheme to defraud and fraudulent use of personal identification information, the Miami-Dade State Attorney’s Office said.

Cue and his company acted as a controller/accountant consultant for the HOA board from October 2018 to November 2022, receiving $644,000 in [fake] vendor payments during that time.

This is not the beginning of a joke…

Under the roof of a small kiosk in front of a shelter for the displaced west of the Nuseirat refugee camp in the central Gaza Strip, three young men gathered one morning in July to prepare falafel and sell it to the displaced people around them.

Small falafel kiosks have sprung up all around Gaza over the past year to cater to the hundreds of thousands of displaced people. This one, though, gained fame – not just for its falafel, but for the story that unites the three young men who run it.

Told ya there wasn’t much going on. Please, I beg you, let me know via email or text if you see anything interesting happening out there. Bye!

The post Tuesday Morning Accounting News Brief: PwC Pulls Out; KPMG Finally Promotes Some Partners | 11.12.24 appeared first on Going Concern.

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

Attn accounting employers: your talent woes are over! Check out this week’s top remote accounting candidates from Accountingfly and start filling those empty (virtual) chairs today.

Sign up for Always-On Recruiting to get a fresh batch of candidates for hire in your inbox every week. It’s free!

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.

The post Friday Footnotes: PwC Scandal Somehow Gets More Scandalous; Deloitte Denied in Court; Withum Embiggens in Florida | 11.8.24 appeared first on Going Concern.

The Aussie feds are swarming PwC Australia HQ, staff have been advised to “please carry on as usual.”

Australian federal police officers have commenced a search for documents at the headquarters of PwC Australia in response to the damaging tax leaks scandal.

Treasury referred the matter – which relates to the sharing of confidential multinational tax proposals within the firm – to police in May last year.

In an email to staff on Monday, the firm’s chief executive, Kevin Burrowes, said staff should expect police to remain inside the Sydney headquarters for “several days”.

“This step is an expected development in relation to an investigation the AFP commenced in 2023 into the historical tax matter and individuals who have left our firm,” Burrowes told staff.

“We have been working with the AFP to facilitate its attendance and will continue to cooperate with its investigation.”

Burrowes urged staff to “please carry on as usual and remain focused on the important work we’re delivering with our clients and in the community”.

Grant Thornton’s most recent burnout survey is concerning:

Fifty-one percent of survey respondents have suffered burnout in the past year, a 15 percentage-point increase from last year’s survey. Respondents said the top causes of burnout were mental and emotional stress at 63%, followed by long hours at 54%.

Alongside the rise in burnout, respondents reported a decline in their overall well-being in 2024, noting a decline in key areas, including mental (32%) and financial (30%) health.

HR Dive discusses the recent CPE situation at EY:

A recent scandal involving online training at Ernst & Young has pulled back the curtain on the time and ethical pressures accountants and finance teams are under to balance the demands of client work with ongoing professional training requirements.

Given the demands CPAs face — often, they serve on understaffed teams due to a shortage of accounting talent, while also needing to obtain continuing professional education credits in order to maintain their certified public accounting licenses — some experts were not surprised to hear about the multi-tasking practice.

“If firms are trying to maintain the same book of business with diminished bandwidth, naturally CPAs are going to deprioritize things that are not addressing their client work, with their CPE requirements being an easy one,” said Omar Roubi, an accounting instructor at the University of Colorado Denver and director of education and content at LumiQ, a podcasting app for CPAs. “Accountants have to do the same amount of work with less resources, with time being one of them.”

Earlier: Studious EY Employees Just Trying to Grind Out CPE Get F**king Fired

Speaking of EY, and possibly “cheating,” EY Netherlands has found answer sharing in their ranks. If you’ve been following this story, you know they are most certainly not alone. Reports NL Times:

The accountancy firm Ernst & Young (EY) is the latest accounting company to discover exam fraud. The company reported this in its transparency report for 2023 and 2024. The fraud consisted of accountants sharing answers to mandatory tests, which is not allowed.

EY has been investigating since last year whether exam fraud took place within the organization between 2018 and 2023. The Netherlands Authority for the Financial Markets (AFM) asked all large accountant firms to investigate the practice. EY expects the investigation to be complete in 2025 but admitted that it has taken longer than expected.

Earlier:

The Conversation (Australia) asks a simple question: The ‘big 4’ accounting firms often consult for the same clients they audit. Should that be allowed?

Public trust in the auditing profession is under intense pressure. A series of high-profile scandals, both in Australia and overseas, has severely damaged its reputation.

This week, Australia’s corporate watchdog – the Australian Securities and Investments Commission (ASIC) – put the entire sector on notice.

In a letter to auditors on Wednesday, ASIC announced it would soon commence a new data-driven surveillance of auditor independence and conflicts of interest. Put simply, any practices that could compromise the integrity of auditing work.

The move comes amid longstanding calls for stronger regulation. Some have gone as far as to call for auditors – particularly the “big four” – to be banned from offering consulting services to their audit customers. Why? Fears it helps companies unethically game the system.

But our recent research, which specifically examines chief executive pay, offers an alternative perspective and suggests we should tread carefully.

You’ll have to go over there to read the view of Helen Spiropoulos, Associate Professor at University of Technology Sydney and Rebecca L. Bachmann, Lecturer in Accounting at Macquarie University.

Times‘ business editor Brian Carey strokes his meat to Grant Thornton Ireland’s recent private equity deal and suggests that Big 4 partners may be jealous:

GTI is a distant fifth in the Irish market, and its acquiring American cousin is an even more distant seventh across the pond. If the second-tier Grant Thornton can generate that amount of wealth for its partners, then its MacGregor-wielding, Babolat-chasing, Lycra-wearing peers must surely be wondering what enormous treasure lurks beneath the Big Four of EY, KPMG, Deloitte and PwC.

The Grant Thornton transatlantic deal is a ground-breaker, and probably overdue. A partnership is a very inefficient way to accrete capital within a business. Professional services firms need to invest in technology and more specifically in artificial intelligence.

Private equity, through New Mountain Capital, the backer of Grant Thornton US, has smoothed the path to corporatisation. It will provide new capital to robotise the drudgery. It will also dismantle the near-feudalism of the partnership system, where the equity partners lord it over the serfs who till the fields. A partnership is like an annuity: it guarantees a fat salary for up to 15-20 years, at which point you are bought out. A corporate structure, with share options as incentives, should introduce some semblance of meritocracy.

Earlier: Grant Thornton Merges With Grant Thornton

Stanford fondly remembers William Beaver, “a ‘titan’ of accounting,” who passed away on October 14.

Beaver joined the Stanford Graduate School of Business faculty in 1969 after four years at the University of Chicago, where he earned his MBA and PhD. He received his undergraduate degree from Notre Dame, where he also met his future wife, Suzanne Marie Hatton.

Throughout his career, Beaver’s innovations expanded and enriched the literature in the accounting field. He became a leading authority on the role that corporate financial statements play on stock prices, and was among the first scholars to examine how financial ratios could predict business failures. His 1966 paper Financial Ratios as Predictors of Failure has been cited more than 10,000 times. In 1968, he published Information Content of Annual Earnings Announcements, which later earned a Seminal Contribution to Accounting Literature Award. He also wrote the book Financial Reporting: An Accounting Revolution, now in its third edition.

“His impact on the research, teaching, and practice of accounting cannot be overstated,” says Maureen McNichols, the Marriner S. Eccles Professor of Accounting and Public and Private Management at Stanford GSB.

In AI news: it’s biased. Surprise. GeekWire digs into why AI prefers white male job candidates:

As employers increasingly use digital tools to process job applications, a new study from the University of Washington highlights the potential for significant racial and gender bias when using AI to screen resumes.

The UW researchers tested three open-source, large language models (LLMs) and found they favored resumes from white-associated names 85% of the time, and female-associated names 11% of the time. Over the 3 million job, race and gender combinations tested, Black men fared the worst with the models preferring other candidates nearly 100% of the time.

That’s all I’ve got for now. If you see something we should be talking about, have a tip, or just an astute observation to share with the class, email or text the tipline (anonymously). Have a great week! Love ya, mean it.

The post Monday Morning Accounting News Brief: Feds Raid PwC; Big 4 Wants to Be Like Grant Thornton!? | 11.4.24 appeared first on Going Concern.

Audit

Private Equity’s Ties to Companies’ Auditors Have Never Been Closer. That Worries Some Regulators. [Wall Street Journal]
By the end of 2025, more than half of the largest 30 U.S. accounting firms will have either sold an ownership stake or part of their business to private-equity investors, up from zero in 2020, said Allan Koltin, chief executive at advisory firm Koltin Consulting Group. An auditor’s objectivity, both real and perceived, is critical to the business of accounting firms, which typically also have consulting and tax operations. Whether that independence can be preserved or not under new buyers is coming into question, especially as private-equity managers take a hands-on approach with their new acquisitions.

Sketchy financials send Supermicro auditors running for the hills [The Register]
Supermicro shares took a nose dive on Wednesday, sliding more than 30 percent after the accounting firm hired to review its reporting practices resigned after determining they were just a bit too sketchy to warrant the risk. “We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and audit committee’s representations,” Ernst & Young wrote in a resignation letter, which also raised alarm bells regarding Supermicro CEO Charles Liang’s influence over the board.

PCAOB Publishes New Supplement to Staff Guidance Concerning the Remediation Process [PCAOB]
On Thursday, the Public Company Accounting Oversight Board (PCAOB) published a supplement to its Staff Guidance Concerning the Remediation Process. The supplement provides audit firms with additional guidance regarding remediation, including making the most of the remediation period, the potential influence of non-technical factors on persistent quality control criticisms, and more. As mandated by the Sarbanes-Oxley Act and implemented by PCAOB rules, the Board cannot disclose its criticisms of an audit firm’s quality control systems for a period of at least 12 months after the Board’s initial publication of its inspection report of that audit firm. During that 12-month period, the audit firm is expected to remediate identified quality control criticisms. If the audit firm fails to address any identified quality control criticisms to the Board’s satisfaction, the Board will then disclose those criticisms to the public. “Making sure audit firms remedy defects in their quality control systems is an important way for the PCAOB to drive improvement in audit quality and protect investors,” said PCAOB Chair Erica Y. Williams. “The PCAOB encourages audit firms to apply this supplement to the staff guidance when addressing quality control criticisms.”

Audit Reports Matter After All, Appeals Court Says [Wall Street Journal]
A federal appeals court has changed its mind and decided that accounting firms’ audit reports really do matter to investors after all. In a case brought by investors against the accounting firm BDO, the Second U.S. Circuit Court of Appeals on Thursday released an amended version of an opinion it originally decided in August 2023. Back then, the court ruled in favor of BDO in a shareholder lawsuit over its audit work for the insurance company AmTrust Financial Services.

Video

Firm Watch

MSL, P.A. joins forces with Forvis Mazars in Florida [Forvis Mazars]
Forvis Mazars is expanding its presence in Florida with the addition of MSL, P.A., effective November 1. MSL has a 50-year legacy of building deep relationships with its clients across Florida. This strategic acquisition significantly bolsters Forvis Mazars’ growing presence in the state by adding approximately 120 professionals, including 14 partners, and new office locations in Orlando and Fort Lauderdale.

BDO promotes 2,400 staff and partners [Business & Accountancy Daily]
UK BDO, obviously.
Top five firm BDO has promoted 2,440 people, including 36 new partners across all its services lines and central operations. Anna Draper, BDO’s head of people, culture and purpose, said: ‘Celebrating the success of our people is such an important part of our culture. I want to extend my congratulations to everyone who has received a promotion and thank them for their hard work and dedication.’

Cherry Bekaert, one of Cincinnati’s largest accounting firms, plans local growth [Cincinnati Business Courier]
Cherry Bekaert came on the Cincinnati accounting scene a little more than a year ago, and it has plans to expand its local presence. “We see a huge opportunity in the market to grow, and we would love to aggressively grow that practice,” Brad Smith, Cherry Bekaert regional market leader, told CBC. “We have an intentional focus to grow Cincinnati.”

Grant Thornton names new Boston office leader [Boston Business Journal]
Jeff Strassman, a partner in Grant Thornton’s audit and assurance practice, is the firm’s new leader in Boston. He succeeds Chris Martin, who has taken on a leadership role within the firm’s tax practice, the firm announced.

Talent

Tax firms see technology as the future, but tax tech personnel are sorely needed [Thomson Reuters]
Although many tax & accounting firms are increasingly focusing on technology, their personnel plans towards technology are largely static, according to the 2024 Tax Firm Technology Report. Many survey respondents said their firms do not have full insight into how their technology is governed and instituted throughout the firm.

Offshoring for CPA firms: The hows and whys [Journal of Accountancy]
Of the more than 1,100 firms that participated in the AICPA’s 2023 National Management of an Accounting Practice (MAP) survey, about 30% said they outsourced domestically and 25% said they outsourced to offshore workers. Another 14% said they planned to start outsourcing domestically, and 12% said they planned to start offshoring. The CPA talent shortage and an increase in demand for accounting services in the United States are prompting many firms to go beyond their traditional hiring practices and explore the global talent pool and staffing across time zones.

Someone should tell the AICPA about the importance of competitive salaries CC: @going_concern https://t.co/2HZX74ztx3 pic.twitter.com/5TjbksOyVp

— McRib Hard Seltzer (@kleib323) November 1, 2024

News

Moody’s revokes bond rating from 9 Massachusetts issuers [Providence Business First]
You guys, this municipal thing is bad. Why aren’t we talking about it more?
Moody’s Investor’s Service on Oct. 9 notified 61 bond issuers across the U.S. that their ratings had been revoked due to “incorrect, insufficient or otherwise inaccurate information.”

Fraudsters get $47 million from practitioner priority service line scheme [Journal of Accountancy]
The IRS was ineffective in its efforts to stop a scheme involving fraudsters calling the practitioner priority service telephone line, resulting in estimated losses of over $47 million, the Treasury Inspector General for Tax Administration (TIGTA) said in a report dated Oct. 22 (TIGTA Rep’t No. 2025-IE-R001). The fraud occurred from Aug. 12, 2023, to April 16, 2024, during which time fraudsters filed 4,828 tax returns and claimed nearly $462 million in refunds, the report said. The IRS detected 4,254 of the fraudulent claims but did not stop 574 returns, TIGTA said. TIGTA said that because of IRS management inaction, it issued an alert on Feb. 8, 2024, to request the IRS plan to stop the fraud immediately.

Practice Management

AI is here to stay – the profession must embrace it, responsibly [ICAEW Insights]
It’s important that accountants adopt AI with their eyes open; aware of its strengths and weaknesses, what kind of AI model is most effective for the task at hand and what needs to be done in order to mitigate the various risks that could come along with it. Accountants have an ethical duty to minimise AI biases by training them with good-quality data.

Is your firm hiring? Having trouble finding anyone good? Accountingfly has your back. Check out this week’s top remote accounting candidates and sign up for Always-On Recruiting to get a fresh batch of accountants and auditors for hire in your inbox every week — it’s FREE!

You might also want to check this out if you’ve been having a tough time DIY recruiting.

The post Friday Footnotes: All Audit Reports Matter; BDO Ordered to Pay; Just How Many Firms Are Offshoring? | 11.1.24 appeared first on Going Concern.

People Management discusses the recent CPE debacle at EY that led to people losing their jobs.

“Given EY’s history with professional training cheating, it’s understandable that they’re taking a firmer approach to personal development,” Martin Drake, director at Higher, told People Management.

However, he also sees a need for a nuanced application of these policies. “Cheating on formal qualifications versus completing multiple surveys on soft skills development feel like two different matters that can be treated in different ways,” he explained.

Drake suggested that “a hard line might not always be the best approach,” advocating instead for a balanced strategy that acknowledges the context of each situation.

“Sometimes all that’s required is a grown-up conversation,” he added, indicating that open dialogue could encourage genuine growth without an overly rigid policy.

Headline of the day courtesy The Times: Grant Thornton partners all set to push boat out as a sale looms

The Sunseeker Ocean 156 cut an imposing shape as it bobbed in the Southampton marina last month. The 82ft superyacht, which boasts three decks, spacious cabins and a built-in barbecue, was appearing for the first time in public at the city’s annual boat show, which drew nautical enthusiasts from across the country.

Among the hordes of well-heeled would-be sailors gazing up at the Sunseeker were several UK partners from the accountancy firm Grant Thornton. If all goes their way, they may be in the market to snap up a luxury yacht of their own next year.

Grant Thornton’s partners, who earned an average of £644,000 last year, are set for a big windfall as their firm prepares to sell a majority stake to a private equity giant. If a deal goes ahead, it will be Britain’s biggest accountancy takeover, but it is dividing the City’s huge accounting community.

Not sure who needs to read this today, probably way too many of you.

The moment I stepped in my first accounting firm… the charge hours required were 2,800 and 3,000 total.

I worked hard, billed the most, and felt terrible. My doctor yelled at me in the first 6 months for being negligent of my health.

I looked around at all of the managers and…

— Crown (@DocCrownMedia) October 23, 2024

H&R Block Canada got hacked and the Canada Revenue Agency didn’t inform the public, reports CBC:

At the height of this year’s tax season, the Canada Revenue Agency discovered that hackers had obtained confidential data used by one of the country’s largest tax preparation firms, H&R Block Canada.

Imposters used the company’s confidential credentials to get unauthorized access into hundreds of Canadians’ personal CRA accounts, change direct deposit information, submit false returns and pocket more than $6 million in bogus refunds from the public purse, an investigation by CBC’s The Fifth Estate and Radio-Canada has found.

In one case, the hackers filed a return with a legitimate postal code, but a fake address on a non-existent Tomato Street.

“Obviously the door is open and some people are infiltrating the system,” André Lareau, an associate tax professor at Laval University in Quebec City, said in an interview. “But the CRA does not seem to have found the key to lock the door.”

Croatia, like everywhere else, is facing a shortage of accounting professionals due in part to mass retirement of boomer-aged accountants. Here’s a proposal to at least make the existing accountants’ jobs easier:

During the Croatian Chamber of Trades and Crafts’ (HOK) second meeting in Trakošćan, more than 200 accounting professionals convened to address this concern and explore solutions.

The meeting underscored an immediate need for a dedicated bookkeeping curriculum to prepare new professionals to enter the field.

A key proposal introduced at the gathering was the adoption of a ‘one piece of data once’ reporting principle.

This initiative aims to streamline data sharing among government institutions, reducing redundant paperwork and lessening the administrative load on accounting firms.

Deloitte is dropping a cool $30 million in Egypt:

Amr Talaat, Minister of Communications and Information Technology, inaugurated the Deloitte Innovation Hub in Cairo, a specialized centre providing innovative tech services. Launched with $30m in investment over three years, this is Deloitte’s first global hub for exporting digital services from Egypt, despite the company’s long-standing presence in the country as a consultancy and accounting firm.

BDO Hong Kong is taking some heat after layoffs:

BDO has confirmed the dismissal of 30 staff members, primarily within its audit division, just five months after prior layoffs, sparking internal discontent over alleged broken promises by senior management. Andrew Lam, the newly appointed Managing Director – Assurance and International Liaison Partner at BDO, exclusively revealed to local media HK01 the tough decisions necessitated by the financial review period in October, traditionally a time for reassessing staff needs against operational demands without compromising client services or regulatory commitments.

“Frankly, it was a tough decision,” Lam stated in a telephone interview, acknowledging the delicate balance the firm must maintain in its staffing levels. This move comes after a similar reduction in May, which also affected 30 employees, indicating a pattern of resizing that BDO insists aligns with broader economic conditions rather than a shift in corporate integrity.

The layoffs have stirred unrest among the staff, with some expressing feelings of betrayal. Earlier in the year, post-May layoffs, assurances were reportedly given that no further cuts would be imminent, yet the recent actions suggest otherwise. “Time flies,” Lam commented on the lapse, suggesting that while the promise was made in good faith, the economic realities dictated otherwise.

Wow. See, this is why firms use corporate communications and PR pros to interact with the media.

Supposedly Kamala Harris would replace SEC Chair Gary Gensler if she gets elected…and one of her top picks is the woman who was literally just sworn in as PCAOB Chair for a second term.

The Harris transition team is vetting candidates to replace Gary Gensler as Chair of the Securities Exchange Commission (SEC), according to two sources close to the deliberations.

Unchained has learned of two potential replacements, Georgetown Law professor Chris Brummer and Chair of the Public Company Accounting Oversight Board (PCAOB) Erica Williams, who are said to have more favorable views on crypto than Gensler.

And that’s it. Bit of a slow day out there. Feel free to email or text any time if you spot something interesting, have a tip, or just want to yap. And follow us on X/Twitter for more lukewarm takes.

The post Monday Morning Accounting News Brief: GT Partners Eye Their Own Yachts; How EY Can Handle ‘Cheating’ Better | 10.28.24 appeared first on Going Concern.

Firm Watch

Whistleblower says big accounting firm hid evidence that a Saudi co-defendant helped finance 9/11 [Florida Bulldog]
So this is…a lot.
As 9/11 victims await a federal judge’s decision on whether Saudi Arabia should be dismissed as a defendant in their massive civil action, “serious” allegations have emerged that a global accounting firm covered up evidence that a co-defendant “was involved in financing the 9/11 terrorist attacks.” An anonymous whistleblower’s letter to a plaintiff’s lawyer involves a forensic accounting expert for the defense, Jonathan T. Marks, who was retained by the Saudi-based World Assembly of Muslim Youth (WAMY) to review records produced during the litigation related to claims made against WAMY and testify about his findings. WAMY, whose U.S. chapter in Virginia was founded in 1992 by a nephew of Osama bin Laden, is a Saudi-funded charity that promotes Islamic teachings and encourages Muslims to be more religiously observant, according to the Pew Research Center. It is “widely regarded as promoting the strict Wahhabi brand” of ultra-conservative Islam, the center said in a 2010 report. An Oct. 9 letter to presiding U.S. Magistrate Sarah Netburn from lawyers for both the 9/11 families and companies with commercial loss claims says the whistleblower “asserts first-hand knowledge that Marks and his employer, the accounting and consulting firm Baker Tilly U.S. LLP, with WAMY and its counsel, engaged in wrongful conduct during Marks’ engagement with WAMY. The conduct, as alleged, distorted the evidentiary record, obstructed expert discovery, and undermined the integrity and purpose of the deposition process (here to elicit the expert’s own independent and uninfluenced responses to the questions posed).”

Big Four firm cuts jobs in Tampa in firm-wide layoffs [Tampa Bay Business Journal]
This confirms what we were told about PwC delaying layoffs in Florida due to Hurricane Milton. A source told us Florida people weren’t in the first wave of layoffs that began on October 7.
PwC US laid off some employees at its Tampa offices on Thursday as it moves forward with firm-wide job cuts. The total number of job cuts across PwC’s three Tampa offices that occurred on Thursday is unclear, according to former employees who spoke with the Tampa Bay Business Journal.

Vault Releases Its 2025 Internship Rankings [PR Newswire]
Vault, the leader in data-driven employer rankings and reviews, today released its 2025 Internship Rankings, highlighting the top programs in more than 30 categories. Vault’s rankings include the Most Prestigious Internships, Best Overall Internships, Best Internships by Key Employment Factor, Best Internships for Diversity, Best Internships by Role, and Best Internships by Industry. The rankings were derived from Vault’s Summer 2024 Intern Survey, which polled almost 20,000 interns at nearly 300 companies. For the second year in a row, New York-based accounting firm PKF O’Connor Davies took the #1 spot on Vault’s Best Overall Internships list. Interns at PKF O’Connor Davies were especially satisfied with their Quality of Life and Compensation. Other accounting firms in the Top 10 Best Overall Internships are Texas-based Weaver, Alabama-based BMSS, and Wisconsin-based Wipfli.

Regulator clears four of nine PwC tax agents over leaks scandal [Australian Financial Review]
The tax agents’ regulator has cleared four of the nine former PwC tax agents it was investigating in the firm’s tax leaks scandal, with five other investigations expected to be finished by the end of the year. The Tax Practitioners Board, which regulates the country’s tax agents, told parliament on Thursday it is still investigating links to overseas partners who received confidential government information as part of its ongoing inquiries into potential wrongdoing by former PwC Australia personnel.

Holtec sues former executives and outside accountant for $70 million in damages, reputational harm from criminal probe [Philadelphia Inquirer]
The lawsuit accuses a CBIZ accountant of forming a shadow company with Holtec’s former CFO and general counsel to embezzle funds.

Deloitte Backs New Program To Unlock Seagrass Recovery Financing [Forbes]
Deloitte has teamed up with Climate Impact Partners for a program to fund U.K seagrass recovery and unlock long-term finance to save and reinstate vital seagrass meadows. The program, in collaboration with Project Seagrass and the National Oceanography Centre, will fund critical research across seagrass meadows around the U.K, mapping the ecosystems and developing methods to restore them at scale.

The Future of the Profession

Alternate Path to Be a Licensed CPA Has Wide-Ranging Benefits [Bloomberg Tax]
NASBA president and CEO Daniel Dustin writes:
More than a year ago, an array of experts from my organization, which represents regulators in accounting for the 55 US jurisdictions, alongside its professional counterpart—the American Institute of Certified Public Accountants—began exploring a question that had been percolating on both sides: Was this model keeping pace with the modern marketplace? After months of intense, back-and-forth work, these groups and their stakeholders arrived in September at what we feel is a balanced solution that incorporates an additional route to “fluency” but observes the same timeless know-how we’ve come to expect of a CPA. We’re calling this additional route a competency-based experience pathway. It still requires a bachelor’s degree and one year of general experience. But it now allows for a year of work experience to function as a means by which accountants achieve the seven competencies long associated with the profession: ethical behavior; critical thinking and professional skepticism; communication; collaboration, teamwork, and leadership; self-management and continuous learning; business acumen; and a technology mindset. Passage of the CPA Exam, as with all our pathways, remains a benchmark.

KPMG CEO Paul Knopp Visits Bentley to Discuss the Future of the Accounting Industry [Bentley University]
Paul Knopp, U.S. chair and chief executive officer at KPMG, visited Bentley for a conversation about the evolving accounting profession — including certified public accounting (CPA) requirements and artificial intelligence (AI) — and the outlook for college graduates entering the field. Knopp talked with small groups of students and professors in their classrooms before joining President E. LaBrent Chrite for an on-stage discussion in the Koumantzelis Auditorium. “There’s no doubt that as I talk to other leaders around the world there’s been more focus lately on how we accelerate the development of interpersonal skills, soft skills, communication skills — those other skills that have become increasingly important,” said Knopp, who spoke at Bentley a day after making international news in the Financial Times as the first Big Four accounting firm CEO to call for replacing the fifth year of accounting education with an apprenticeship. The number of U.S. accounting undergraduates has dropped to its lowest level in 15 years, and the number of people taking the CPA exam has fallen as graduates opt for high-paying jobs in financial services, tech and other industries.

A Brief Message From Management

Hey people,

We're looking to speak to former Intuit employees let go in the last batch of layoffs who have had issues with unemployment claims due to the company attempting to block them.

DM here or use our contact info in bio. Anonymity is assured.

— Going Concern (@going_concern) October 23, 2024

Local

Potsdam village officials to begin search for new auditing firm [North Country Now (New York)]
The country-wide municipal mess continues…
The village [of Potsdam, NY] is looking for a new firm to complete its annual fiscal audit. Village Administrator Isabelle Gates-Shult told board members at their meeting Monday, Oct. 22 that the municipality’s normal firm, Potsdam-based financial firm Pinto Mucenski Hooper VanHouse & Co., CPA’s, PC, can no longer complete the audits due to staffing issues. The village is searching for a firm that can conduct two audits, one for fiscal year 2022-2023 and for the current fiscal year, 2024-2025. “We received news that our external auditor that is assigned to our annual audit is resigning and the firm does not have sufficient staffing to take over our 2022-2023 audit,” Gates-Shult said.

State audit shows Butler County residents overtaxed by nearly $223,000 over 3-year-period [KFVS (Missouri)]
An audit by Missouri Auditor Scott Fitzpatrick finds Butler County residents were overtaxed by approximately $222,770 over a three-year period. Fitzpatrick says the audit shows the County Clerk failed to accurately calculate the property tax levy reduction amount collected for 2020, 2021 and 2022. According to the audit report, Butler County voters had previously enacted a one-half cent sales tax with a provision to reduce property taxes by 50 percent of sales taxes collected but, when calculating the reduction, the County Clerk did not account for the difference between estimated and actual sales taxes collected for the preceding year.

Portland schools to pay accounting firm $500,000 to resolve retirement plan issues [WGME (Maine)]
Portland Public Schools said this week it will spend half a million dollars to contract with an outside accounting firm to help resolve ongoing issues with payments to the state retirement system. Late last year, Portland Public Schools hired the accounting firm BerryDunn to support its finance team amid the ongoing payroll problems. The firm has also been tasked with helping to rectify the retirement plan issues. Now the district is hoping to enter into another one-year contract with BerryDunn, with the hope of resolving the remaining issues with MainePERS.

NJ tells Clifton it can’t audit its finances until it has the money to do so [NorthJersey.com (New Jersey, duh)]
The state Department of Community Affairs has ruled that the city needs to wait to authorize a forensic audit of its finances until it has the necessary funds, which won’t be available until after Nov. 1. Council members, impatient that the administration had yet to award an auditing contract, recently took the matter into their own hands and voted 4 to 3 to award it to the Holman Frenia Allison firm. In doing so, the council majority ignored the administration’s warning that such a measure was prohibited by state law. Councilman Joe Kolodziej said he voted against awarding the contract partly because as a certified financial officer, he has to follow state law. His other reason, he said, is that the forensic audit is overkill. “I’m in favor of a financial management study, but I’m opposed to paying forensic audit prices for it,” Kolodziej said. “The public is being deceived, and we could get the same result for half the price if we actually asked for proposals for a study.”

NYC handed out $6.5 million in tax breaks to ineligible homeowners, comptroller says [Gothamist (New York)]
New York City’s Department of Finance mistakenly handed out $6.5 million in tax breaks to the ineligible owners of hundreds of co-op and condo units over the past five years, according to a new audit by the city comptroller’s office. The auditors found the finance department granted the improper tax breaks through the Cooperative and Condominium Tax Abatement program, incorrectly waiving payments for owners of at least 678 condo and 42 co-op units who didn’t meet program requirements during the 2023 fiscal year. To qualify, owners must designate the unit as their primary residence and own no more than three units in the same building.

Rules and Regs

FASB advances credit loss accounting relief for private firms [CFO Dive]
The Financial Accounting Standards Board has agreed to move ahead with a proposed standards update aimed at simplifying how private companies and most not-for-profit entities account for credit losses when it comes to current accounts receivable and contract asset balances stemming from revenue transactions, according to a recap of tentative board decisions made at the U.S. accounting standard setter’s meeting last week. The board also set a 45-day comment period for the update.

Firms Battle Global Deals Accounting Changes Backed by Investors [Bloomberg Tax]
Companies oppose being forced to disclose in financial statements how well their business acquisitions have performed, according to responses to a public consultation by global standard-setters. Investors had supported the International Accounting Standards Board’s March proposal, saying it would help them assess acquisitions. The board’s plan would require companies to publish full details of post-acquisition performance against targets in the notes to their financial accounts.

Deloitte study: seven out of ten multinationals expect an increase in public reporting on tax as a result of recent regulations [Deloitte]
More than two thirds of companies worldwide (70%) expect an increase in public reporting on tax, as a result of the numerous regulations adopted in recent years, making data transparency and compliance with authority requirements the main challenge they currently face, according to Deloitte 2024 Global Tax Policy Survey. Digitalization of tax was ranked as the second most significant challenge, but expectations are optimistic regarding this matter – 59% of participants in the survey see the potential of e-invoicing and digital reporting for trade to simplify tax compliance, even with the need for significant investment. However, 10% believe the effect will be the opposite. The third major challenge for multinationals is related to the international tax reform, comprising the two-pillar agreement signed under the coordination of the Organization for Economic Co-operation and Development (OECD), but also the digital service taxes and the United Nations (UN) initiative for international tax cooperation, recently launched in response to the developing countries’ request. Thus, 54% of participants in the survey expect more complexity in tax reporting under Pillar II of the OECD reform (the global minimum corporate tax), which will be implemented over the next three years.

Tenth B.C. public company auditing firm fined, censured by U.S. regulator [Vancouver is Awesome]
Another Vancouver-headquartered public company auditing firm has recently been penalized by the United States regulator overseeing market regulations, bringing the total to 10 such companies since March 2021. Additionally, another firm, headquartered in Toronto but with offices in B.C., has been penalized for work it conducted on a B.C.-registered firm. “This latest round of orders shows that firms cannot neglect their responsibilities to keep audit committees informed and report required information to the PCAOB,” said Robert E. Rice, director of the PCAOB’s division of enforcement and investigations.

Talent

Attention firms big and small alike! If you’re in the market for talent, look no further than Accountingfly’s accounting candidates of the week. Whether you’re looking to hire an accountant ASAP or just window shopping, sign up for the Always-On service to get great candidates available for hire every week in your inbox. It’s free!

AI

Students using generative AI confess they’re not learning as much [KPMG Canada]
59 percent of 423 Canadian students surveyed use generative AI in their schoolwork, compared to 52 percent in 2023. That’s a year-over-year increase of 13 percent; 75 percent say generative AI tools have improved the quality of their schoolwork; Over two thirds (67 percent) of students using generative AI say they don’t think they are learning or retaining as much knowledge; 82 percent admit that they claim generative AI content as their own work; 70 percent say they are turning to generative AI tools for help rather than asking their instructors.

Thomson Reuters acquires agentic AI accounting assistant firm Materia [Silicon Angle]
Founded in 2022, Materia provides AI assistants that help accountants automate knowledge work for tax, auditing and research to improve their effectiveness when working with clients. The company does so by using a new AI methodology called “agentic workflows,” where AI does more than provide summaries and answers, but can also perform actions without human intervention for generating reports, emails, analysis and more. Thomson Reuters Ventures, an early investor in Materia, assisted in building proof-of-concepts for Materia’s AI assistant. The investor participated in Materia’s $6.3 million funding round in June this year, which was led by Spark Capital.

The post Friday Footnotes: Baker Tilly Did What!?; Internship Ranking Winner Same As Last Year; Pillar II to Be a PITA | 10.25.24 appeared first on Going Concern.

Yesterday Financial Times published a story about PwC UK’s top consolation prize:

Senior PwC staff in the UK who will never be partners are to be offered a new “managing director” title as the Big Four firm seeks to keep top employees whom it is unwilling to admit to its £1mn-a-year partnership.

People familiar with the matter told the Financial Times the UK firm had introduced the new grade to hold on to a key layer of senior accountants and consultants and to bring in external hires with higher salaries.

However, the role would not serve as a stepping stone towards becoming partner as managing directors would be ineligible for promotion to the top rank, they added.

The University of Miami has chosen permanently-jumpscared-looking former Deloitte CEO Joe Echevarria as president:

“Joe knows and understands complex institutions,” stated Manny Kadre, chair of the UM Board of Trustees. “Joe’s vast experience in managing complexity is evident from his 36 years at Deloitte LLP, a global provider of professional services, where he led tens of thousands of professionals in more than 100 cities across five continents and multiple industries. Here at the U, he has immersed himself in our academic environment, working closely with faculty and academic leaders, diving deep into our processes, and empowering the teams closest to our mission to strive for excellence.”

As acting CEO, Echevarria supported transparency and supported academic faculty, Kadre said.

In a matter of weeks, we should be hearing that the Pentagon has failed yet another audit. Defense One argues this is a good thing:

Far from a mere compliance exercise, the cultural and technological changes required to pass an audit are the same ones necessary to keep U.S. forces dominant.

For the Defense Department to pass its audit, it must account for more than dollars. It must track the vast array of things the military uses: munitions, spare parts, fuel, real estate. Moreover, it must track the condition of these things: In the shop? Ready for use? In the field? And it must do so accurately and in real time. All this requires comprehensive changes. Cyber security must be improved, systems integrated, processes and automation deployed to ensure the accuracy of data, and more.

Undaunted, DOD has attacked these problems with resolve and money. Over the past five years, the department has spent more than $4 billion to improve visibility and transparency. Efforts to pass the audit have helped integrate data from finance, logistics, and readiness systems, breaking down longstanding silos and making it possible to see across the entire defense enterprise. What was once a cumbersome and time-consuming process—yielding outputs that were neither timely nor reliable—has become more streamlined.

Earlier this year, the Marines became the first US military branch in history to receive a clean audit opinion.

The AICPA has established a scholarship named after outgoing president, CEO, and vintage waffle iron collector Barry Melancon:

The AICPA Foundation has launched the Barry C. Melancon Professional Accounting Research Fellowship to support the next generation of accounting and finance professionals with the skills, knowledge and training to advance the accounting and finance profession. The Fellowship has been established as a legacy of Barry Melancon’s 30-year leadership tenure at the AICPA & CIMA as well as his dedication, advocacy and future-focused commitment to the profession.

“I have been fortunate to spend my career as an advocate for our great profession. The passion that I have had for the profession and the spirit of everything that I did was for the betterment of the profession and the people within,” noted Barry Melancon, President and CEO of the AICPA and CEO of the Association. “It is a personal joy to be able see the creation of a Fellowship in my name to encourage others to contribute to the profession’s benefit, advancement, and future.”

In survey news, Deloitte released one this morning.

A new external survey released today by Deloitte zeroes in on what many employees are looking for in corporate learning and development opportunities — and where organizations might be missing the mark. The inaugural survey found that while 87% of workers see human skills like adaptability, leadership, and communications as integral to their career advancement, only around half (52%) think their company values employees with human skills more than those with technical skills.

In addition, 3 in 5 surveyed employees believe their company focuses more on immediate business needs than providing the training they may need for long-term success. This could signal challenges for companies down the line, with 94% of respondents expressing concern that future generations will enter the workforce without the necessary human skills.

“Organizations that overemphasize technical training at the expense of enduring human capabilities — like divergent thinking, emotional agility, and resilience — could end up impeding innovation and leaving employees ill-equipped to lead teams, adapt to market opportunities, and fully harness the potential of technology,” said Anthony Stephan, chief learning officer, Deloitte US. “Technical and human skills are symbiotic, which is why leaders should take a ‘Yes AND’ approach — for the investments they make in tech skills, developing an equally exciting and critical human skill experience.”

This guy thinks CISOs need their own GAAP:

If CISOs are really going to elevate their position in the C-suite and truly drive meaningful discussion about cyber risk, they’re going to need to have the same rock-solid level of reporting that their brethren in the finance department bring to their board discussions. Financial reporting data has become extremely structured and repeatable across all enterprises because it’s guided by the standards set out through generally accepted accounting principles (GAAP), which are governed by the Financial Accounting Standards Board (FASB). Everybody measures the same things, in the same way. Doing this makes it hard to cook the books and easy to ensure that the yardstick reads the same way no matter the business.

I believe that we’re going to need to get to a place where we have GAAP-style accounting for security monitoring. This may seem like a tough ask to make of the industry—standards battles are always long and never pretty. But we’re getting to a point where regulators, insurance companies, and veteran risk executives will scramble to find a way to make it happen because there’s such a dire need.

If we can get to a consensus of generally acceptable security monitoring practices, setting out a standard reporting structure it becomes easier for auditors to check best practices, for insurers to get real-time snapshots into exposure levels, and for CISOs to easily translate exposures into financial risk quantification that makes sense to the board. This kind of ground-truth reporting is crucial for next-generation security executives to have the right conversations with the board about how to prioritize where resources should go first, what it’s going to cost, and the next steps organizations need to take.

ICYMI: American Institute of CPAs (AICPA) and the National Association of State Auditors, Comptrollers and Treasurers (NASACT) suggest state and local governments step it up to beat the talent shortage. Press release:

State and local governments are being squeezed by a shortage of accounting professionals, making it difficult at times to find staff CPAs who can prepare critical financial information or outside firms to conduct audits. Addressing this problem will require a multifaceted approach, including educating legislative bodies about the value of the CPA, offering competitive salaries for CPAs in government and fees paid to outside auditors, and reviewing the thresholds that trigger certain kinds of audits, according to a joint report by the American Institute of CPAs (AICPA) and the National Association of State Auditors, Comptrollers and Treasurers (NASACT).

“We have a talent shortage in accounting that affects business as a whole, and many of the pipeline initiatives the profession is putting in place will help the public sector as well,” said Susan Coffey, CPA, CGMA, the AICPA’s CEO of public accounting. “But accountants who do government work face unique challenges that require more specialized solutions. The public deserves to know its tax dollars are being spent as intended — and that requires strong government finance teams and experienced auditors.”

One key issue is that government and private sector accounting and auditing standards often differ, so CPAs working in the public sector require specialized expertise. Yet salaries and audit fees are often well below those offered in the private sector, the report found. State and local governments also don’t always understand the value CPAs bring to finance teams and the audit process, so hiring is often driven by a cost-savings approach, rather than a focus on the qualifications that an experienced staff accountant or outside auditor may bring.

And Journal of Accountancy article:

The report, Public Sector CPA Resources: The Current Landscape and Recommendations for the Future, is built on the efforts of a joint working group that gathered insights from a series of forums and a comprehensive survey. The report ranked a lack of competitive compensation and the need for specialized government technical expertise as key factors stymying governments in the hiring and retention of CPAs.

Fifty-six percent of 450-plus survey respondents employed in accounting, auditing, or finance at a state, local, or tribal government entity said compensation concerns have a large impact in this area. One respondent who works in local government commented that accounting professionals “can make double doing anything else.”

Further, 63% of government respondents agreed that the technical expertise required of CPAs in the public sector had a large or moderate impact on the challenge of hiring and retaining qualified professionals.

In municipal messiness, the city of Sturgis in South Dakota is bringing on an outside accountant to help them with their accounts:

In a recent audit report conducted by accounting firm Ketel Thorstensen, it was revealed that the city has not reconciled all of their bank accounts since 2023.

To help dig them out of their financial problems, the city approved a $15,000 contract with CPA firm Casey Peterson and Associates during a council meeting two weeks ago.

A public accountant from the firm will be on contract until December to help Sturgis get caught up with their finances.

Allegedly the problem is some issue with their accounting software. Yeah, everyone says that.

In late August, the South Dakota Department of Revenue released its tax collection numbers for the 2024 Sturgis Motorcycle Rally and revealed the yearly gathering of bikers brought in $1,399,501 in revenue generated from state sales tax, tourism tax, municipal sales tax, and municipal gross receipts tax.

Al Pacino has put out a memoir. I wasn’t planning on reading it but I’m tempted now. Variety on how Pacino’s shady accountant made him broke and desperate:

Al Pacino writes in his recently-published memoir “Sonny Boy” that he was forced to make dramatic career changes after losing all of his money due to a corrupt accountant who eventually served seven and a half years in prison for running a Ponzi scheme. The accountant mismanaged the Oscar winner’s funds, bringing Pacino’s savings from a staggering $50 million to zero dollars.

According to Pacino, it was in 2011 when he started “to get warnings that my accountant at the time, a guy who had lots of celebrity clients, was not to be trusted.” The actor was already paying “a ridiculous amount of money to rent some big fancy house in Beverly Hills,” and then he took his entire family on a trip to Europe where he flew various guests overseas “on a gorgeous Gulfstream 550” and “rented out a whole floor of the Dorchester hotel in London.”

When Pacino returned to his Hollywood home, he became suspicious after realizing his finances had not dramatically changed despite spending so much on vacation. “And I thought, It’s simple. It’s clear. I just know this. Time stopped. I am fucked,” he writes.

Maybe I’ll buy it and jam it in there on the bookshelf next to Retail Gangster.

“There isn’t a better time to be getting into the CPA profession, in part because there’s a lot happening,” says Zach Donah, president and CEO of the Massachusetts Society of Certified Public Accountants (MassCPA).

Due to a growing global business environment, an increase in part-time services and a rising need for companies to meet environmental, social and governance (ESG) criteria, the accounting profession is expected to grow 6% over the next decade, Donah said. That outpaces the overall projected job growth over the next decade, according to the U.S. Bureau of Labor Statistics.

Data nerds will delight in some figures released by INSIDE Public Accounting:

At 67% of participating firms, partner agreements have been updated within three years; at 27% of firms these agreements have been updated within the last 12 months; and at 7% of firms they haven’t been updated in 10 years or have never been updated.

Fifty percent of participating firms have a formal process to cull clients. Of those that culled clients, firms on average reduced their clients by $290,000. For firms over $30 million, the average revenue culled was $630,000, or a little over 2% of revenue.

Eighty-one percent of firms offer business development incentives to staff and/or partners. In 37% of firms, these incentives are paid out for a year for new clients while in 13% of firms, staff receive incentives for the life of the client.

For more news, check out Friday Footnotes, published here every Friday at 5pm Eastern. Last Friday’s Footnotes: The Profession’s Ethics Dilemma; Co-Pilot Called Out in Court For Calculations; Audit Uncovers File Called ‘Twilight Zone’.

That’s it for now on this chilly October morning. Feel free to reach out via email or text if you see an interesting story we should be talking about, have a tip to share, or just want to vent. You may also send any comments, concerns, or compliments in my direction but be gentle, I’m more sensitive than I let on.

Have a great week!

The post Monday Morning Accounting News Brief: PwC Consolation Prizes; Al Pacino’s Accountant Ripped Him Off | 10.21.24 appeared first on Going Concern.

Firm Watch

Accountancy firm BDO fined €1.3 million for work with Russian-held football club Vitesse [NL Times]
The fine is regarding the work that BDO did as an accountant for football club Vitesse, and a holding company of the former owner of the club, Russian businessman Valeri Oyf, sources told FD. There are said to have been murky cash flows surrounding deposits of 6.2 million euros, FD reported on Wednesday. BDO was supposed to report an unusual transaction to the national Financial Intelligence Unit in 2020. That is the reporting point in the Netherlands for potentially suspicious transactions that may be linked to money laundering or other criminal activity. BDO is going to appeal the decision.

Private equity-backed Citrin Cooperman to acquire CT accounting firm [Hartford Business Journal]
Woodbridge-based accounting and consulting firm Teplitzky & Co. has entered into an agreement to be acquired by New York-based professional services firm Citrin Cooperman. Under the agreement, Citrin will acquire substantially all the assets of Teplitzky & Co. P.C., located at 1 Bradley Road in Woodbridge, the firms said Thursday. Financial terms of the agreement were not disclosed.

Practice Management

Most accountants see ethical challenges increasing: ACCA [CFO Dive]
Most accountants see ethical challenges growing more complex throughout their profession as technology speeds the expansion of businesses worldwide, exposing regional differences in law and culture, the Association of Chartered Certified Accountants said. Nearly one-in-four accountants (24%) have faced pressure to act unethically during the past three years, and 55% of finance executives have witnessed unethical behavior during their careers, the ACCA said Monday, reporting on a global survey.

An untethered workforce is the future, EY says [HR Dive]
As the global workforce continues to evolve, talent acquisition and retention will shift toward personalized employee experiences and expectations rather than typical rewards and physical work locations, according to an Oct. 11 report based on EY’s 2024 Work Reimagined Survey. For instance, 38% of employees said they’re likely to quit in the next year, which will require company flexibility and a plan for talent flow. This means untethered culture, expanded rewards and agile skill building will become more prevalent, the report found.

Why ‘Trust’ in Data is Even More Important in an Era of Global Taxes [PwC]
We are in a time of unprecedented change in the global tax and compliance landscape — exemplified by the OECD’s Pillar Two. With implementation now well underway, large multinationals are contending with the world’s first truly global corporate tax system, and it’s placing significantly greater burdens on their co-ordinated data collection and pan-global reporting. Companies are faced with the task of gathering and transforming as many as 330 distinct data points for potentially hundreds of constituent entities for Pillar Two alone. However, Pillar Two is not the only emerging data challenge. Since 2021, the EU’s Corporate Sustainability Reporting Directive (CSRD), which requires large companies to report on their environmental and social impact, has compelled organisations to consider vastly more data points across the different functional areas of their organisation and supply chains. Many of these data points are not currently managed by existing systems or data controls indicating that many organisations’ data strategies, technologies, processes and systems are underprepared.

Talent

It’s the end of the week and you know what that means! No, not a nap. A new batch of remote accounting candidates for hire have been prepared by Accountingfly for your review. They’ve already sifted out the riff-raff, these are the good ones. Sign up for Always-On Recruiting to get more great candidates like these in your inbox every week.

Audit

Auditors found lost human rights cases in file labeled ‘Twilight Zone’ [Times Union]
An audit released Thursday by the state comptroller’s office found the New York State Division of Human Rights had failed to investigate dozens of housing discrimination cases due to poor management that resulted in complaints being lost, mislabeled and unprocessed. Some complaints that were not entered into a case management system were found by Division of Human Rights officials “in a filing cabinet labeled the ‘Twilight Zone,’ where some cases labeled ‘defective’ were filed, meaning they required more information and were not being investigated further,” the comptroller’s office said.

SEC’s Dropped Auditing Charges Shows Damage of Jarkesy Decision [Bloomberg Law]
The Securities and Exchange Commission’s recent decision to drop misconduct charges against a handful of auditors proves the SEC v. Jarkesy ruling threatens the agency’s ability to protect the investing public and to police auditors and public accounting firms that violate their duty of care. The message from the US Supreme Court justices was clear: If you violate the law as an auditor, the SEC is limited in how it can hold you accountable. Yes, laws such as the Sarbanes-Oxley Act are still on the books setting standards for financial recordkeeping and reporting. And in an ideal world, auditors would follow the law without the threat of enforcement, and the need for sanctions, fines, and prohibitions on practicing before the SEC would be superfluous.

Empire State Building owner reports ‘material weakness’ in accounting [Crain’s New York Business]
Empire State Realty Trust last week quietly disclosed “material weakness” in its accounting because of ineffective controls around its computer systems. The issues behind the weakness were at first missed by the landlord’s accounting firm, Ernst & Young, said Douglas Carmichael, an accounting professor at Baruch College’s Zicklin School of Business who reviewed Empire State Realty’s disclosure for Crain’s.

News

Two CPAs Sentenced in Billion-Dollar Syndicated Conservation Easement Tax Scheme [Department of Justice]
Two accountants were each sentenced today to 20 months in prison for their roles in the promotion and sale of abusive syndicated conservation easement tax shelters. According to court documents and statements made in court, Victor Smith was a CPA and founding partner of an Atlanta-based accounting firm. Beginning at least in 2014 and through at least 2019, Smith promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants Jack Fisher, James Sinnott and others. Smith, along with his firm, sold approximately $14 million in false tax deductions to their clients, causing a tax loss to the IRS of about $4.8 million. He earned $491,400 in commissions from Fisher and Sinnott for his role in the scheme. William Tomasello was a CPA at another accounting firm who, at least in 2015 and through at least 2019, also promoted and sold units to his wealthy clients in these same syndicated conservation easement tax shelters. Tomasello sold approximately $8.5 million in false deductions, causing a tax loss of about $2.3 million. He earned approximately $525,072 in commissions.

79% of CFOs expect net profit growth in 2025 [CFO]
In Grant Thornton’s recently published Q3 2024 CFO survey, more than three quarters (79%) of CFOs said they expect growth in net profits over the next 12 months. Although this figure is a 10-quarter high, CFO confidence is also coming at a four-quarter low. Confidence to meet goals for increased demand over the next twelve months fell 12 points to 51%.

Technology

Could artificial intelligence fuel the future of financial investigations? [Deloitte]
This hypothetical scenario begins in a small bungalow in a suburban town, a seemingly unlikely spot for a sinister plot to unfold. There, Grandma Evelyn’s evening crossword puzzle is interrupted by a soft ping from her tablet. The message claims to be from her beloved grandson, Ethan, who says he is stranded in a prison outside of the country and in desperate need of bail money. Heart pounding, Evelyn watches the attached video message. There, apparently, is Ethan, pleading for help. Without a second thought, Evelyn rushes to her bank. Evelyn withdraws US$25,000 from her life savings and, as instructed earlier, deposits it into seven different Bitcoin ATMs scattered across town. Each transaction sends the cryptocurrency to wallets controlled by a faceless global criminal organization that has never laid eyes, let alone hands, on Ethan. As Evelyn returns home, her relief is short-lived. Another message appears on her screen, this time demanding access to her computer. Before she can react, her device is hijacked, and Evelyn watches helplessly as her bank accounts and retirement funds are drained of US$500,000. The funds vanish into the depths of cyberspace, leaving her financially crippled and emotionally shattered.

N.Y. Court Opines on Use of AI by Experts [Reason]
Although the Court has found [proposed expert witness Charles Ranson’s] testimony and opinion not credible [see below -EV]…, a portion of his testimony bears further and separate discussion as it relates to an emerging issue that trial courts are beginning to grapple with and for which it does not appear that a bright-line rule exists. Specifically, the testimony revealed that Mr. Ranson relied on Microsoft Copilot, a large language model generative artificial intelligence chatbot, in cross-checking his calculations. Despite his reliance on artificial intelligence, Mr. Ranson could not recall what input or prompt he used to assist him with the Supplemental Damages Report. He also could not state what sources Copilot relied upon and could not explain any details about how Copilot works or how it arrives at a given output. There was no testimony on whether these Copilot calculations considered any fund fees or tax implications.

KPMG Australia becomes first company in the world to achieve certification to AI management system standard by BSI [KPMG]
KPMG Australia and BSI Australia today announced that the firm has become the first organisation globally to achieve ISO 420001 (AI) certification by BSI. ISO 42001 (AI) is a new international standard that specifies requirements for establishing, implementing, maintaining, and continually improving an Artificial Intelligence Management System (AIMS) within organisations. One of the first internationally recognised standards for AI, ISO 42001 is administered by the International Organization for Standardization and is the world’s first AI management system standard, providing valuable guidance for this rapidly changing field of technology.

The post Friday Footnotes: The Profession’s Ethics Dilemma; Co-Pilot Called Out in Court For Calculations; Audit Uncovers File Called ‘Twilight Zone’ | 10.18.24 appeared first on Going Concern.

An ‘everygirl’ tells the tale of being pressured to choose a major, landing on accounting, and regretting the decision in ‘I Was Dedicated to My 5-Year Plan—and Then It Blew Up in My Face‘:

It was the fall semester of my sophomore year of college. I had a mandatory meeting with my academic advisor to discuss my next semester’s courses. I didn’t know it then, but a decision I made that day would set my five-year plan in motion.

My rationale for choosing the accounting route ultimately came down to the degree being more specialized. I could utilize my accounting knowledge to work in business, but if I had a business degree, it would be harder to land a job in accounting.

And so she trudged forward at the urging of her school’s accounting program…

While rigorous and challenging, I loved the absoluteness of this plan. If I did all of these things and checked all of these boxes, I would be happy and successful. No ifs, ands, or buts about it. I knew what I had to do, I set off on the path, and I never looked back. Graduate undergrad. Check. Land an internship at a prestigious accounting firm. Check. Start graduate school with a full-time job offer in hand. Check. Everything was going according to plan—until it wasn’t.

Fast forward to her sitting for the CPA exam 10 times and failing 9 while still in grad school…

I had a glaring red flag in front of me that I was in the wrong profession, and yet, I clung to my career in accounting because it was a part of the plan. I clung to it even when I began to dislike the work. I clung to it even when I cried in the bathroom at the office. I clung to it even when I had to pop a melatonin on my drive home at midnight during the busy season to ensure I’d fall asleep in time to wake up and do it all again. I held onto my accounting career until I was white in the knuckles because I had invested too much energy, time, and money into the profession. I was so unhappy, but it was unfathomable for me to do anything else.

A church in Texas is accused of fraud. Bring in the CPAs!

Writes Religion Unplugged:

Responding to a lawsuit accusing Dallas-based Gateway Church of financial fraud, Gateway Elder Tra Willbanks assured congregants over the weekend that the church has “independently audited financial statements since 2005.”

He added, “These audits have demonstrated that our finances are managed consistent with best practices, and we have never had any wrongdoing revealed through these audits.”

The firm conducting the audits is Capin Crouse, a nationally recognized auditing firm for nonprofit organizations, Willbanks said.

However, a “seasoned CPA,” mentioned as a whistleblower in the lawsuit filed Friday against Gateway, told The Roys Report (TRR) that Gateway did not conduct any audits during his time on staff,  from 2011-2014. Instead, Gateway conducted financial reviews, which “are not designed to detect errors or fraud.”

Local news is on it.

And in other fraud news, a CFO behaving badly:

The ex-chief financial officer at convicted former attorney Tom Girardi’s law firm pleaded guilty Friday to helping the once-prominent litigator embezzle millions in settlement funds from clients.

Christopher Kamon, 51, entered his plea to two counts of wire fraud in Los Angeles federal court.

Sentencing was scheduled for Jan. 31, at which time Kamon faces up to 40 years behind bars.

Kamon, the former head accountant at the now-defunct Girardi Keese firm, admitted his role in the scheme and acknowledged embezzling millions of dollars from the firm’s accounts for his own use. He agreed to forfeit $3.1 million as part of the deal.

Apparently, and this is something I didn’t know until now because I like to believe I’m above watching trashy Bravo shows even though I am so obviously not, Tom Girardi is one of the Real Housewives husbands. This is from NBC News in August:

Former “Real Housewives of Beverly Hills” star Tom Girardi, the disbarred attorney, was found guilty Tuesday in the embezzlement of millions of dollars from his former clients.

A federal jury in Los Angeles convicted Girardi, the 85-year-old estranged husband of “Real Housewives” star Erika Jayne, on four wire fraud charges. The charges alleged he stole money from his clients over a decade, including $3 million from relatives of the victims of the 2018 Lion Air crash in the Java Sea, which killed 189 people.

He pleaded not guilty last year. His sentencing is scheduled for Dec. 6.

Tyler Hatcher, special agent in charge of the IRS criminal investigation unit in Los Angeles, said Girardi “exploited his clients’ misfortunes on a grand scale.”

PwC Netherlands should be getting a call from the PCAOB any day now, they’ve uncovered — clutch those pearls, it’s bad — EXAM FRAUD. NL Times reports:

Exam fraud has been committed at PwC in the Netherlands, the accounting and consultancy firm reported this in its annual report for 2023 and 2024. Earlier, fraud with tests was discovered at industry peers Deloitte and KPMG, among others.

The exam fraud consisted of accountants sharing answers to mandatory tests, which is not allowed. “We know that this behavior is contrary to the integrity and trust that must form the basis of our business, and we are determined to tackle this problem thoroughly,” PwC wrote in the annual report.

According to PwC, the extent of the fraud cannot yet be determined, as the investigation is still ongoing. The Netherlands Authority for the Financial Markets (AFM) asked all major accounting firms to conduct such an investigation. The study at PwC, which covers July 2017 to October 2023, is expected to be completed in the next financial year. That financial year runs until the end of June 2025.

KPMG Netherlands received the biggest PCAOB fine to date back in April for their own exam cheating. Forvis Mazars caught its people cheating too. And Deloitte. Those darn Dutch and their answer sharing (that everyone else around the world does too)!

Speaking of Forvis…Forvis Mazars launched a hackathon in Nigeria. This publication called them “Farvis Marvars” and I can’t stop laughing.

Farvis Marvars, an audit, tax, and consulting firm, has launched its first hackathon to enhance cybersecurity solutions.

The maiden edition tagged: ‘’Innovate with Forvis Mazars Hackathon’’ brings together innovative young minds aged 18-35 from diverse backgrounds to collaborate and develop cutting-edge solutions for pressing cybersecurity challenges.

According to the firm, participants will work on innovative ideas across AI in audit, data analytics, data sciences, data privacy, and compliance over a six-week duration.

The firm noted that the hackathon is a significant step towards empowering the next generation of cybersecurity professionals and driving impactful change in the industry.

NJBIZ seeks to answer the question “How can CPA firms reverse decade-long slide in new membership?“

They asked the wrong people.

A Big Four professional said investing in employees is one way to replenish the pipeline.

“KPMG is able to attract and develop talent to grow with quality top-of-mind,” said KPMG US Short Hills Office Managing Partner Jennifer Shimek. “We attract and retain accounting professionals through collaborations with universities, offering the Master of Accounting with Data and Analytics Program and Audit Intern Bootcamp. We invest in learning and development through on-demand learning on our smart audit platform and collaboration at KPMG Lakehouse. We also help people achieve the CPA through our CPA Kickstart program, which provides people from all backgrounds the opportunity to get paid while studying for the exam with enhanced resources.”

She noted that KPMG is also leveraging artificial intelligence as a complement to flesh-and-blood activity. “We don’t view AI as a substitute for auditors,” Shimek explained. “Audits will always require human judgment. However, AI helps address the CPA shortage by attracting more people to the profession. AI reduces manual work, creating more time for higher-value work that people enjoy. It is also creating new demand from companies, helping us to expand into new areas like cybersecurity and AI governance. This shift not only attracts new talent, but also reinvigorates the sense of purpose in auditing, ultimately strengthening our workforce.”

Anyone else creeped out by the phrase “a complement to flesh-and-blood activity”? Maybe I’ve just been playing too much Silent Hill 2 this past week. You see it too? For me, it’s always like this.

RSM picks up Deloitte’s sloppy seconds, a failing British telecom:

TalkTalk’s auditor has quit as the debt-laden broadband firm faces a fresh squeeze on its finances.

Deloitte, which has served as TalkTalk’s auditor since August 2002, has resigned from its role, according to company filings.

A spokesman for TalkTalk said the resignation was a result of a planned rotation following a break-up of the group last year. RSM has been appointed as Deloitte’s replacement.

It comes after billionaire founder Sir Charles Dunstone and other shareholders were recently forced to pump another £235m into the struggling broadband firm to stave off collapse.

And PwC pays for some environmental mess:

PwC is thought to have paid £132 million to British American Tobacco for its role in a “deeply flawed” audit of one of the tobacco giant’s subsidiaries, which was accused of dumping toxic chemicals into two rivers in the US.

The UK maker of Lucky Strike and Dunhill cigarettes had been seeking more than £600 million in damages from the Big Four giant for a “negligent” audit of a historic division of BAT, Windward Prospects, a paper maker. The tobacco giant claimed that the flawed audit caused Windward to breach its commitment to cover environmental clean-up costs.

Windward, which is now in administration, was accused of dumping chemicals used in making carbonless paper for duplicating receipts and invoices, into rivers in Wisconsin and Michigan.

The Times got this information from PwC UK’s annual report which showed the firm set aside £181 million for legal claims and regulatory fines, £162 million of which was paid out in cash. That’s much higher than last year’s fine pool of £33 million and “significantly higher” than similar funds at the other three Big 4 firms.

OK, we’re done here. Shoot me an email or text if you happen to see an article you think we should discuss, have a tip to share, or just want to talk about James Sunderland’s descent into madness (alternatively, why Pyramid Head is a sympathetic figure at his core).

Have a great week, everyone!

The post Monday Morning Accounting News Brief: No One Plans to Hate Accounting; PwC Was Cheating!? | 10.14.24 appeared first on Going Concern.

News

AICPA moves to amend financial statement standard [CFO Dive]
Well this is a BFD!
As it’s become increasingly popular for external CPAs and even CFOs to help run a company’s financial operations, the American Institute of CPAs is looking to clarify the standard for how financial statements prepared as part of an external client advisory services engagement are treated. The move is designed to address the uncertainty, confusion and diversity of practice with respect to the subject, said Mike Glynn, associate director of audit and attest standards and staff liaison for the AICPA’s Accounting & Review Services Committee.

Firm Claims Financial Misconduct by Central Basin GM, Then Admits the Numbers ‘Could Be Incorrect’ [Los Cerritos Community News]
Los Cerritos Community News out here doing some hard-hitting journalism. That is not sarcasm.
A few weeks ago, Los Cerritos Community News exclusively reported that Central Basin Municipal Water District’s (CB) cash on hand had dropped $3 million in only seven months after attorney Victor Ponto, who was appointed in February, took over for Dr. Alex Rojas after the ruling majority on the CB Board illegally placed Rojas on leave. Two weeks later, LCCN exclusively reported that some CB Directors, after they appointed Ponto, immediately began taking thousands more in payments to attend dubious “meetings.” This past week, a report on CB was released by the firm Carr, Riggs & Ingram (CRI) alleging “lax oversight” of CB finances during the tenure of General Manager Dr. Alex Rojas, whom Ponto took over for in February. Interestingly, after ignoring LCCN’s stories that found millions in potential fraud and waste, the Whittier Daily News was at-the-ready to publish an article about the CRI report, which claimed to find $200,000. The report, which, according to sources, cost CB an eye-opening $400,000, concluded that $123,000 was misspent, including more than $75,000 in “inflated salary” extra pay and benefits that went to Rojas.

Remaining Downtown: While others move on, an accounting firm is expanding in the Golden Triangle [Pittsburgh Post-Gazette]
At a time when many firms are downsizing their office space, Louis Plung & Company is going against the flow. The accounting and advisory firm is moving its Downtown headquarters to the 20 Stanwix — an office building at Stanwix Street and Fort Pitt Boulevard overlooking the Monongahela River — where it has signed a lease for 18,041 square feet of space. The move will not only allow Louis Plung & Company to expand its team, but will keep the firm Downtown at a time when some other businesses have departed because of concerns about crime, safety, and other issues. It was “extremely important for us to remain Downtown. We’ve been a part of this city for over 100 years and we want to remain an integral part of Pittsburgh’s vibrant business community and help shape the city’s future,” Managing Partner Lou Plung said in a statement.

CLA Wealth Advisors Named to Barron’s 2024 Top 100 RIA Firms List [CLA]
CLA Wealth Advisors (CliftonLarsonAllen Wealth Advisors LLC), continued its upward climb in the annual Barron’s list of Top 100 RIA Firms. Part of CLA (CliftonLarsonAllen LLP), one of the country’s leading professional services firms, CLA Wealth Advisors ranked 45th, rising five places since last year’s list and marking the seventh year the firm has been recognized by the prestigious publication.

Talent

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Here are this week’s top remote accounting candidates for your browsing pleasure.

Crypto

Former Crypto CEO Posts Hilarious LinkedIn Update Right Before Going to Prison [Futurism]
The LinkedIn grind never stops — not even for prison. Ryan Salame, the former co-CEO of the now-defunct crypto exchange FTX, was sentenced in May to seven and a half years in federal prison after pleading guilty to criminal charges related to conspiracy to operate an unlicensed money transmitting business and unlawful campaign donations. In addition to serving time in prison, Salame was ordered to forfeit $1.5 billion.

Tether looks to revamp US image as it celebrates 10 years [FOX Business]
Tether’s reserves have long been a source of controversy, with the broader crypto industry criticizing the company for its previous lack of transparency and auditing. As a stablecoin, Tether’s tokens are pegged to the U.S. dollar, and the company asserts that all $119 billion worth of USDT tokens in circulation are fully backed one-to-one by dollar reserves. However, since Tether is not based in the U.S. and conducts most of its business offshore, it has never undergone a full audit by a U.S. accounting firm, fueling skepticism about the true state of its reserves. As part of its settlement with the New York attorney general, Tether agreed to submit quarterly reports on its reserves for two years. The firm now uses the Italian arm of global auditor BDO to produce quarterly attestations of its stablecoin reserves. As of Aug. 1, BDO reported that Tether had $118.4 billion in reserves and $5.3 billion in excess reserves. Tether also now publishes daily reports on its website that detail the amount of Tether in circulation and the amount of USD reserves held by the company. However, Tether has never had a full audit done, even by BDO, as its quarterly attestations do not qualify as systematic examinations of the whole company and its financial statements.

Audit

Big Four audit firms conclude transition period of operational separation [Financial Reporting Council (UK)]
The Financial Reporting Council (FRC) has today announced the four largest audit firms (Deloitte, EY, KPMG, PwC), have concluded the transition period of operational separation. Throughout the three-year transitional period, all four firms have made significant improvements to their governance to prioritise the delivery of audit quality. This includes the creation of independent audit boards chaired by Audit Non-Executives, improved transparency on financial transactions between the audit and non-audit business, and greater accountability at firm level for the delivery of operational separation outcomes. The firms have also developed audit specific cultures, with behaviours focussed on challenge, openness and professional scepticism. All four firms have met the 2024 deadline set by the FRC to implement the principles of operational separation. As set out in the Operational Separation Principles, the FRC will publish an assessment of the firms’ compliance each year, following the transition period.

Salaries

This accountant makes $76,000 a year. How does she spend it? [Toronto Life]
Rent: $1,950 a month. “I used to live with a roommate and paid $1,244. But the privacy is worth the extra rent.” Takeout: $0. “I never get takeout, and I haven’t bought a work lunch in two years. I always pack a lunch and plan my meals.”

Practice Management

Case studies: How I bought/sold my accounting business [Accounting Times (Australia)]
Kev Ryan says patience with, and trust in, the buying and selling process will overcome the many challenges of making a good match. And while there is a proper process to follow, it’s vital to recognise that there is no such thing as a one-size-fits-all solution. “Every transaction has its own peculiarities, especially mergers,” Ryan says. “The individual requirements of each party must be respected. You can’t template or rush transaction advisory.” Just as accountants regularly advise their clients on process, it’s important that they also seek expert advice on what’s required in selling or buying a firm. “We’re constantly talking to our clients about following the proper purchase process of undertaking thorough due diligence,” Ballinger says. “So, it was good for us to do that ourselves, to get that experience and find out exactly how it works.”

Lawmakers press Deloitte on ‘fraud’ in application to $5B Texas fund for gas-fired power plants [Houston Chronicle]
Texas lawmakers grilled executives from Deloitte, the consulting firm contracted to manage a $5 billion taxpayer-funded program mainly intended to kickstart construction of natural gas power plants, after the organization advanced a potentially fraudulent loan application. Allegations first arose last month that a little-known company, Aegle Power, sought loans for its proposed natural gas power plant by listing another big-name company as a sponsor without permission. Additional scrutiny revealed Aegle Power CEO Kathleen Smith had previously been convicted in an “embezzlement scheme” related to the development of a different power plant. In addition to seeking to slash the consulting firm’s up to $107 million contract, lawmakers heard accusations Tuesday that Aegle Power falsified yet another aspect of its application to the state.

Technology

Deloitte: Why Only a Quarter of Cybersecurity Professionals are Women [TechRepublic]
As of 2023, women make up only 20% and 25% of the cybersecurity workforce, according to training body ISC2. New research from Deloitte explores the reasons behind this gender gap, despite the high demand for skilled professionals in the industry. Half of young working women interested in cybersecurity feel they lack sufficient knowledge of the field to pursue a career in it. Furthermore, 55% of all women surveyed believe the industry could prove intimidating, and 47% are concerned they wouldn’t be taken seriously. The results, published in “POV Reimagined: Women in Cybersecurity” in October, are based on a survey of 8,000 non-cyber professionals from around the world conducted by Deloitte Global and media company The Female Quotient.

More awareness needed to transform workforce, says EY consultant [The Edge Malaysia]
More Malaysians need to be aware that the advent of artificial intelligence (AI), digital transformation and the green economy will make some jobs irrelevant in the near future, according to a consultant from Ernst & Young (EY) Malaysia. If not addressed properly, EY Malaysia consulting managing partner Chow Sang Hoe said the Malaysian workforce risks being left far behind in the evolving global economic landscape. He said this in conjunction with the upcoming release of the future skills frameworks by the Ministry of Human Resources: a report to prepare Malaysia’s workforce for the future needs of the industry. “The study is done. We got the data. But now we need to get Malaysians [to buy in] and not be complacent,” Chow told The Edge in an interview. “I’m not trying to make people panic, but we need to increase the awareness that it’s time to do something.”

Tax firms want new tech but need infrastructure to handle it, new report shows [Thomson Reuters]
As technology has become more commonplace in the business world, the need to become tech-savvy has taken increased importance among tax & accounting firms. Leadership at all sizes of firms has pinpointed technology as a significant or central part of the overall firm strategy, and next-generation technologies such as generative artificial intelligence (GenAI) are firmly on firms’ radars. At the same time, however, leadership focus on GenAI has not translated into practical applications, according to a new report from the Thomson Reuters Institute. The 2024 Tax Firm Technology Report has found many tax & accounting firms still have a way to go in making sure technology actually works in the best interest of the firm. Even if firms are increasingly purchasing software solutions, few firms have the personnel, workflows, and leadership strategies to make sure they are getting the most out of their technology usage, the report shows. Overall, those firm leaders surveyed said they feel they are relatively mature in their technology usage compared to peers.

Exclusive: New Zealand accounting firm confirms Sarcoma ransomware attack [Cyberdaily.au]
The Feilding-based New Zealand accounting firm Advanced Accounting has confirmed it was the victim of a recent ransomware attack. Ransomware newcomer Sarcoma listed the company on its darknet leak site on 10 October, claiming to have stolen 115 gigabytes of data. No ransom demand has been listed by Sarcoma; however, the gang is threatening to publish the data within 13 days. Sarcoma has already published a raft of documents as evidence of the hack, including scans of passports and driver’s licences, as well as financial documents. Advanced Accounting has said it is aware of the incident, and a spokesperson told Cyber Daily that “we are mortified this has happened and doing our very best to get everything resolved”.

The post Friday Footnotes: AICPA Gets Around to Addressing Outsourcing; Prison-Bound CEO Updates His LinkedIn Hilariously; Big 4 Split | 10.11.24 appeared first on Going Concern.

The motivational poster in the background is

PwC UK is restructuring. That’s rarely good news, especially given recent layoffs and lowered partner payouts they’ve had in the last year or so.

PwC’s new UK chief has launched an overhaul of its operations in the country, which will involve creating a standalone technology and artificial intelligence unit, in a move that bosses acknowledged could be “unsettling” for staff.

Yeah, that doesn’t sound good.

The Big Four accounting firm told employees last week that it would embark on a reorganisation of areas of the business affecting about 2,700 staff and partners, adding that it was part of its “new vision to become the pre-eminent firm”, according to a document seen by the Financial Times.

Under the plan, PwC will create a “digital delivery unit” focused on tech innovation, AI engineering, cloud and data. The firm will also overhaul parts of its consulting, deals, risk and tax practices by moving and merging certain functions, creating six new teams.

This story was mistakenly left out of Friday Footnotes so putting it here instead. The AICPA is putting in work for taxpayers affected by Hurricane Helene:

The IRS announced relief for taxpayers in all or part of seven states that Hurricane Helene damaged (IR-2024-253). The AICPA, which requested IRS relief in a comment letter, on Thursday also requested filing extensions from the Financial Crimes Enforcement Network (FinCEN) related to the filing of beneficial ownership information (BOI) and reports of foreign bank and financial accounts (FBAR) for major disaster victims.

The IRS is providing disaster relief for individuals and businesses affected by Hurricane Helene, including all of Alabama, Georgia, North Carolina, and South Carolina. The relief also covers 41 counties in Florida, eight counties in Tennessee, and six counties and one city in Virginia.

BDO unironically released a survey about what clients expect from their audit firms.

The inaugural 2024 BDO Audit Innovation Survey, released today, finds that companies increasingly expect their audit firms to leverage advanced technologies like AI to enhance the audit process, believing that this will lead to a higher-quality audit. However, survey results also indicate that companies believe working with experienced, effective audit professionals is just as important as ever, even with the advent of new technologies.

Highlights:

• Finance leaders believe technology can improve audit quality: Just over half of respondents anticipate technology will enhance audit quality (54%); however, finance leaders continue to place high importance on auditor industry knowledge and professional skepticism as contributors to a high-quality audit.
• Mindfully deployed technology unlocks new levels of trust: 63% of senior finance leaders say trust is somewhat or significantly enhanced for them and their key stakeholders when auditors use advanced technology, and 64% say they look for a firm to use AI before even engaging with an auditor.
• Finance leaders will leverage AI to supplement the talent shortage: Although recruiting experienced accountants is the top strategy for companies grappling with the labor shortage, 61% plan to improve workforce inefficiencies with AI.

Cool, now do one about offshore work.

I learned something new today thanks to the Zoomers on TikTok obsessed with Lyle and Erik Menendez. Apparently their dad’s dad owned an accounting firm in Cuba:

José Menendez came to the United States as a penniless teenager and was determined to succeed, demanding excellence of himself and later his two sons, Lyle and Erik. However, the Menendez brothers would eventually say that drive for prestige and fortune came with a dark side that nobody knew about—leading them to take deadly action.

José Menendez was born in Havana, Cuba, in 1944. According to crime researcher and author Rachel Pergament, his father was a soccer player who owned an accounting firm, while his mother was a star swimmer and member of the country’s sports hall of fame. He had two older sisters, Terry and Marta.

AND their dad got his first job at what would eventually be PwC:

Now with a family to support, José was more determined than ever to succeed in America. According to The Los Angeles Times, he picked up his first professional job at the Coopers & Lybrand accounting firm. One of his clients, Lyon’s Container Service in Illinois, was so impressed by his work that the company hired him away to become its comptroller. Within three years, José was company president.

Well I guess I need to force myself to watch one of these new documentaries because I was a kid when the Menendez brothers’ trial happened back in the 90s and certainly wouldn’t have been interested in their dad getting his start in Big 4. The Big 4 for me back then was Mountain Dew, Doom, Nuthin’ but a ‘G’ Thang, and sleeping until noon.

Did you guys see this thing with a Deloitte principal leaking a text conversation he had with JD Vance back in 2020? We really should write it up. Well now apparently Deloitte is getting some heat from the red side, reports Washington Post:

Republicans backing Donald Trump are threatening Deloitte, a consulting firm that is one of the federal government’s largest business partners, with the loss of billions of dollars in contracts because an employee shared messages from 2020 in which GOP vice-presidential nominee JD Vance criticized the former president’s record.

…

“I’ve never seen anything like this,” said Kedric Payne, senior director of ethics at the nonpartisan Campaign Legal Center and former deputy chief counsel in the Office of Congressional Ethics, adding that the goal was probably to pressure Deloitte into firing the worker. “You can’t imagine that if one employee out of thousands made a statement that offended an official, that then the government contracts would be in jeopardy.”

When WaPo first reported it they didn’t name the principal — it’s Kevin Gallagher (don’t worry that cat has been out of the bag for a while) — so Breitbart wrote this on September 27: Exclusive — Deloitte Consultant Behind Ethically Questionable Leak of JD Vance Communications to Washington Post.

This could get messy.

EY is still dealing with headaches related to its work on NMC Health. If you can call it work. FT:

EY missed a chance to spot fraud promptly at collapsed hospital administrator NMC Health because it failed for seven years to access a key financial register, according to a $2.7bn legal claim brought by administrators.

A skeleton argument prepared for a procedural hearing at London’s High Court on Friday said the auditor would have “quickly” identified the alleged fraud that led to NMC’s collapse if it had secured access to the company’s general ledger. Inspecting the general ledger — a record of all a company’s financial transactions — is regarded as a basic yet critical task in an independent audit.

Earlier:

Young professionals at PwC Belgium will be driving to and from the client site in new Mini Coopers:

According to PwC Belgium, the procurement is likely to enable the company to meet its fleet emission targets faster than initially assumed. In 2021, the Belgian PwC subsidiary committed to reducing the emissions of its vehicle fleet by 20 per cent every two years – with the aim of being emission-free by 2030. By phasing out 200 BMW 1 Series and purchasing new electric Minis for the company’s young professionals, it could now reach its target as early as 2028.

[M]ore than three-quarters (77%) of its vehicle fleet is now electric or partially electric. However, the company does not state the total number of cars in its fleet. A total of 200 Mini Cooper electric vehicles will be delivered by the end of the year. At a recent event organised by manufacturer Mini Belux and PwC Belgium, almost 160 young employees were welcomed in Vilvoorde to introduce them to the vehicle and hand over the keys.

Why don’t all PwCs give out Mini Coopers? It’s perfect!

I think that’s enough for now. Let me know by email or text if you spot a story we should write about, have a tip, or just want to share an observation on the current state of the accounting profession. I will be deeply engrossed in Silent Hill 2 beginning tomorrow but promise I’ll get back to you.

Have a great week! That exclamation point I meant.

The post Monday Morning Accounting News Brief: Ruh Oh, PwC’s Restructuring; Boycott Deloitte? | 10.7.24 appeared first on Going Concern.

PayPal Completes Its First Business Transaction Using Stablecoin [Bloomberg]
They paid an EY invoice LOL
PayPal Holdings Inc. completed its first business payment using its proprietary stablecoin as a way to demonstrate how digital currencies can be used to improve often-clunky commercial transactions. PayPal paid an invoice to Ernst & Young LLP on Sept. 23 using PYUSD, the stablecoin the firm launched last year, relying on an SAP SE platform to complete the transaction. SAP’s platform, known as the digital currency hub, allows enterprises to send and receive digital payments instantly, around the clock. The invoice amount wasn’t disclosed.

SEC Charges Olayinka Oyebola and His Accounting Firm With Aiding and Abetting Massive Fraud [SEC]
The Securities and Exchange Commission charged Olayinka Oyebola and his Public Company Accounting Oversight Board-registered accounting firm, Olayinka Oyebola & Co. (Chartered Accountants), with aiding and abetting a massive securities fraud perpetrated by Mmobuosi Odogwu Banye, also known as Dozy Mmobuosi, and three related U.S. companies that Mmobuosi controlled (the Tingo entities). The SEC recently obtained a $250 million final judgment against Mmobuosi and the Tingo entities.

Tax

There’s some Intuit drama coming to a boil. See here:

I just watched two hours of the annual Intuit investor meeting and the Q&A at the end was very interesting.

Poll question at the end.

Please repost this thread so we can gather a lot of opinions about Intuit.

What a change… I actually remember back when Intuit was a partner…

— Mike Sylvester, CPA (@MikeSyl36625988) October 3, 2024

Big 4

After a Deloitte client’s $2.4B tax dodge faltered, the accounting giant won’t say if it helped others exploit the same loophole [International Consortium of Investigative Journalists]
Late last year, the Internal Revenue Service notched a significant win in its fight against high-end tax dodging when a federal judge in Colorado upheld the agency’s challenge to a $2.4 billion tax deduction claimed by Liberty Global, a multinational telecommunications firm. The case, which centered on a complex offshore tax maneuver that generated the huge write-off for the corporation, was described by one industry observer as the “worst nightmare for tax planners” who seek out vulnerabilities in federal tax law. Yet the role of Liberty Global’s own tax advisor — the accounting giant Deloitte — has received little scrutiny, despite U.S. authorities describing the firm as playing a key role in designing the scheme. Liberty Global’s controversial tax maneuver, code-named “Project Soy,” shuffled assets between the firm’s companies in countries such as Belgium, the Netherlands and Slovakia in order to exploit a loophole in a landmark Trump-era tax law, according to court filings. The Justice Department asserted that Deloitte had approached Liberty Global with the original idea for Project Soy, a claim Liberty Global has denied in multiple court filings. If Deloitte did market the loophole, as the Justice Department suggested, it could add to a rich history of Big Four accounting firms selling their well-heeled clients on complex and aggressive ways to avoid tax. It would also raise questions about whether other multinationals received the same advice as Liberty Global — and whether additional challenges could be coming.

Evergrande Auditor PwC China Flops in First US Inspection [Bloomberg Tax]
PwC’s Chinese arm, battered from a $62 million penalty for its botched audits of developer Evergrande, struggled to meet basic US auditing requirements including testing property and equipment values and conflict of interest rules. Public Company Accounting Oversight Board inspectors found fault with each of the seven PricewaterhouseCoopers Zhong Tian LLP audits they reviewed last year, according to results the regulator released on Wednesday.

What’s this?

Just got this in the mail, I was laid off over a year ago.
byu/NoAdhesiveness3384 inBig4

KPMG Appoints Maura Hodge to Lead US Sustainability Practice [ESG Today]
Professional services firm KPMG announced that it has appointed Maura Hodge to lead its US sustainability practice, taking over the role of US Sustainability Leader from Rob Fisher, who in turn has been appointed KPMG US Consulting Sector Leader for Financial Services and Insurance Hodge has been with KPMG for nearly 20 years, most recently serving as ESG Audit Leader, leading the firm’s national efforts around ESG measurement, reporting, and assurance.

Firm Watch

Energy equipment supplier Holtec files lawsuit against accounting firm CBIZ [Reuters]
U.S.-based energy equipment supplier Holtec International has filed a joint lawsuit with two other firms against accounting firm CBIZ and its senior executive Lonnie Davis, the company said on Thursday. The company also alleged business misconduct, including fraud, breach of contract and accounting malpractice, against CBIZ and two former Holtec executives, Chief Financial Officer Robert Galvin and General Counsel Andrew Ryan.

CliftonLarsonAllen to move Valley operations to Hayden Ferry Lakeside campus [Phoenix Business Journal]
A major accounting firm with national reach is moving its local operations to Tempe Town Lake. CliftonLarsonAllen, or CLA, announced Oct. 1 it is taking about 55,000 square feet at the Hayden Ferry Lakeside office campus in Tempe. CLA is expected to move into the building and operate a new “connection center” and office across multiple floors beginning in December 2025. That connection center is a dedicated space for employee learning and development, leadership training, collaboration, events and client meetings.

Deloitte once again named Tax Firm of the Year at the ITR Asia-Pacific Tax Awards 2024 [Deloitte]
The “once again” is a little sassy, no?
The International Tax Review (ITR) Asia-Pacific Tax Awards 2024* rankings were recently announced and Deloitte is extremely proud to announce that we have been named as the New Zealand Tax Firm of the Year for the second consecutive year. In the wider Asia-Pacific region, Deloitte was also the winner of:

• Tax Firm of the Year
• Transfer Pricing Firm of the Year
• Global Executive Mobility Tax Firm of the Year
• Indirect Tax Firm of the Year
• Tax Compliance and Reporting Firm of the Year
• Tax Innovator of the Year
• Tax Technology Provider of the Year

Baker Tilly Acquires Alirrium, Expanding Robotic Process Automation and AI Capabilities [Baker Tilly]
Effective Nov. 1, the move strengthens Baker Tilly’s capabilities in RPA, artificial intelligence (AI) and machine learning to better support businesses in modernizing their operations and improving their competitive edge. Alirrium is known for its expertise in intelligent RPA integration, serving a diverse client base that includes both government and commercial enterprises.

Citrin Cooperman Announces 2024 Partner Class [Citrin Cooperman]
Congrats to all nine of them. We mean that.
“I could not be prouder of this dynamic group of leaders,” said Citrin Cooperman Advisors LLC CEO Alan Badey. “They embody the best of Citrin Cooperman and have all demonstrated a deep commitment to the core values that drive our success. I am confident that their collective focus on strengthening our culture, providing outstanding client service, striving for professional excellence, and driving innovation will serve the Firm well in 2024 and beyond.”

BDO USA Announces New Principal Class [BDO]
BDO USA has promoted 56 professionals to principal, effective October 1.

Brown Plus Grows Firm by Welcoming Three New Team Members [PRWeb]
Wait, did they really put out a press release for this?
Martina Shea joined Brown Plus as an Outsourced Accounting Senior Associate with 20 years of accounting and office management experience. She has an Associate’s degree in Accounting from Harrisburg Area Community College. Martina is located at the Brown Plus office in Hanover, Pennsylvania.

Talent

City’s accounting firms see a slowdown in hiring amid industry-wide workforce shortage [Crain’s New York]
New York’s largest accounting firms’ growth may finally be leveling out; their headcounts increased by an average of just 6.8% in 2024, down from a 12% uptick last year and a 34% jump in 2022.

Is your firm hiring? If so, you’ll want to check out this week’s top remote accounting candidates from Accountingfly.

The post Friday Footnotes: Intuit Pisses Off Tax Practitioners; Deloitte Won’t Talk About Tax Dodging; Whatcha Up To, KPMG? | 10.4.24 appeared first on Going Concern.

Hot Takes

Welcome the whip-crackers [Accounting Today]
Dan Hood has an, uh, interesting perspective on private equity’s influence in the accounting profession.
Providing the capital necessary to fund the retirement plans of the profession’s baby boomer and Gen X partners has been a major reason that accounting firms are turning to private equity — but that in itself will bring structural changes that make it easier to hold all members of the partner group accountable. That’s because PE doesn’t just bring the capital that accounting firms lack; it also brings a seriousness about goals and bottom lines and key performance indicators that accounting firms have often let slip in the interest of maintaining a collegial atmosphere. PE firms also bring more of a willingness to have those difficult conversations: Collegiality is nowhere near as much of a priority for them as profit.

Survey Says

Deloitte: 50% More Professionals Rank Data Privacy as a Top GenAI Concern in 2024 [TechRepublic]
Concerns over data privacy in relation to generative AI have surged, a new report from Deloitte has found. While last year only 22% of professionals ranked it among their top three concerns, this year the figure has risen to 72%. The next highest ethical GenAI concerns were transparency and data provenance, with 47% and 40% of professionals ranking them in their top three this year. Meanwhile, only 16% expressed concern over job displacement. Staff are becoming more curious about how AI technology operates, particularly with regards to the sensitive data. A September study by HackerOne found that nearly half of security professionals believe AI Is risky, with many seeing leaked training data as a threat. Similarly, 78% of business leaders ranked “safe and secure” as one of their top three ethical technology principles, marking a 37% increase from 2023, further demonstrating how the issue of security is top of mind.

Controllers prep for ‘dramatic’ role changes, focus on value creation: EY [CFO Dive]
Over the past decade, CFOs have seen their roles evolve from a purely numbers-focused position to one where they are expected to be a strategic driver for their organizations — and financial controllers are right behind them. Eighty-six percent of controllers believe their role will change “dramatically” by 2030, according to a report by Big Four firm Ernst & Young released Wednesday. While controllers recognize that change is coming, and coming quickly, they “don’t necessarily have a view on what that will look like,” Myles Corson, EY global and EY Americas strategy and markets leader, financial advisory services said. Indeed, 26% of controllers expect their roles will require completely different, or “unknown” skills by the end of the decade, EY’s Inaugural DNA of the Financial Controller report found — meaning both finance chiefs and controllers must prep for a coming future where their roles look very different than they do in present-day.

Talent

Hey employers, are you looking to hire accountants to fill remote or hybrid roles? Accountingfly has some right here! Check out this week’s top remote accounting candidates and sign up for Always-On Recruiting to get a fresh batch in your inbox every week. It’s free!

Audit

PCAOB Sanctions Five Audit Firms for Violations Related to Audit Committee Communications or Reporting Requirements [PCAOB]
The PCAOB imposes censures, $165,000 in total fines, and remedial undertakings that include training and improvement of policies and procedures. Four sanctioned firms failed to make certain required communications with audit committees, as required by AS 1301, Communications with Audit Committees, and/or Rule 3524, Audit Committee Pre-approval of Certain Tax Services. The firms are the following:  Accell Audit & Compliance, P.A. (PDF) – $40,000 civil money penalty and censure; Crowe MacKay LLP (PDF) (Canada) – $30,000 civil money penalty and censure; Ernst & Young AG (PDF) (Switzerland) – $45,000 civil money penalty and censure; Grant Thornton LLP (PDF) (Canada) – $30,000 civil money penalty and censure. Two of these firms, Crowe MacKay LLP and Grant Thornton LLP, also failed to document audit committee pre-approval of certain services, in violation of AS 1215, Audit Documentation. In addition, Accell Audit & Compliance, P.A. failed to communicate in writing all material weaknesses to an issuer’s audit committee, in violation of AS 1305, Communications About Control Deficiencies in an Audit of Financial Statements.

Auditor Proud Day hits decade of international recognition [Accountants Daily]
Auditor Proud Day lands on the last Thursday of every September and is aimed at attracting more people to the profession and celebrating those already working within it. The day is a CA ANZ-led annual social media movement around the world which attracts all peak accounting bodies to celebrate the audit profession.

Cruising the #AuditorProud hashtag, it looks like everyone else forgot about it too. Not these guys though.

Happy #AuditorProud day! Today is about celebrating our #audit teams worldwide who ensure transparency, trust and accountability in today’s financial landscape. Thank you for your commitment and excellence! We are always looking for our #NextGenAuditors: https://t.co/Ps7of7fCQq pic.twitter.com/or2hfiyi4s

— Forvis Mazars Group (@ForvisMazarsGrp) September 26, 2024

Happy Auditor Proud Day! Celebrating our advisors who champion transparency and trust. Thank you for your dedication to excellence! #AuditorProud #AuditorProudDay #Audit #Accounting pic.twitter.com/B2MHhrc01C

— Grassi (@GrassiAdvisors) September 26, 2024

Firm Watch

Deloitte Named ESG Firm of the Year at International Tax Review 2024 Americas Tax Awards [PR Newswire]
Deloitte announced today that it has received four awards at the 2024 International Tax Review (ITR) Americas Tax Awards, honoring its accomplishments delivering market-leading services and solutions. Deloitte was named “ESG Firm of the Year” and “Diversity Equity & Inclusion Firm of the Year,” becoming the first winner of the ESG award category in its inaugural year recognized by ITR. Additionally, Deloitte was named “Tax Technology Firm of the Year” in the Americas region for the seventh consecutive year, as well as “Tax Innovator of the Year” for the fourth consecutive year.

Katz Nannis & Solomon Accounting Firm Sued Over 2023 Data Breach [Bloomberg Law]
Massachusetts-based accounting firm Katz Nannis & Solomon PC failed to protect the personal information of thousands of people that was exposed in a November 2023 data breach, three proposed federal class actions said. Bertha Godbee, Phenicia Brown, and Delores J. Williams alleged in separate lawsuits that KNS breached its duties under common law, contract law, industry standards, and the Federal Trade Commission Act to implement reasonable and adequate measures to protect sensitive data as well as failed to provide accurate and prompt notice of the breach.

PKF O’Connor Davies Welcomes Donald Melody as Partner [PRWeb]
Melody joins the organization’s Public Company and Financial Services practice areas with over two decades of experience conducting and supporting audits and providing consulting advice to broker-dealers, including prior service as a Branch Chief with the Securities and Exchange Commission (SEC) and an Inspections Leader for the Public Company Accounting Oversight Board (PCAOB). “Don’s career spans the auditing spectrum, and his multifaceted background has equipped him with an invaluable and in-depth understanding of the complexities involved with ensuring compliance for organizations of all types,” said Clare Cella, Managing Partner of PKF O’Connor Davies LLP. “In particular, his time with the SEC and PCAOB has afforded him an insider’s perspective into the evolving regulatory landscape that will benefit our clients and our team immensely.”

Barnes Dennig, one of Cincinnati’s largest accounting firms, merges with Indianapolis company [Cincinnati Business Journal]
One of Greater Cincinnati’s largest accounting firms is getting bigger. Downtown-based Barnes Dennig has finalized a transaction to merge an Indianapolis CPA firm into its operations. The deal that will combine Barnes Dennig with Greenwalt CPAs is due to be completed Jan. 1, 2025. “This is a very big deal for us,” Jay Rammes, Barnes Dennig managing director, told me. “It’s quadrupling our presence in that marketplace. You have to be a certain size in a market to build a brand and attract talent. We wanted to get some critical mass there.”

Technology

Building an AI-ready firm: Strategies for responsible integration and growth [Thomson Reuters]
As evidenced in the 2024 State of the Tax Professionals Report, recruiting and retaining new professionals is a top priority given the shortage of tax and accounting talent and a shrinking labor pool. That’s why many accounting firms are now directing more of their energies toward hiring, training, and engaging high-performing staff, as well as cultivating an AI-savvy work culture. Not only is culture important, but AI must align with your accounting firm’s business goals. AI should not be adopted for its own sake but with clear objectives like improving efficiency, enhancing client service, and driving growth.

Accountants Behaving Badly

Marshall woman accused of bilking family company and spending money at casino [Minnesota Star Tribune]
The former accountant of a family construction company skimmed more than $95,000 from the business and spent it on gift cards, a Spotify subscription and trips to casinos among other things, county prosecutors said. Rikki Lee Kor, 49, of Marshall was charged with 24 felony counts of fraud in connection with the alleged embezzling that spanned about a year until this summer.

Education

UVM $15M Gift from Grossman Family Foundation to Launch Undergraduate Business Co-op Program [University of Vermont]
A $15-million gift to the University of Vermont’s (UVM) Grossman School of Business will create the university’s largest experiential Co-op program, providing students with real-world experiences working in leading companies to better prepare UVM Catamounts for impactful careers and leadership in business and entrepreneurship. The new undergraduate Co-op program will enhance experiential opportunities for students in the school’s four concentrations (accounting, finance, marketing, business analytics) and themes (entrepreneurship, sustainable business, and global business). More immersive than a typical internship, a Co-op is a rigorous academic experience through which students alternate between classroom education and full-time employment, gaining practical, hands-on experience in their field of study as part of their undergraduate degree. Working in a partner company for a full semester, students apply their classroom knowledge to meaningful, real-world business situations.

The post Friday Footnotes: Private Equity DGAF; Controllers Reflect on Their Future Skill Set; PCAOB Does Something | 9.27.24 appeared first on Going Concern.

ICYMI: the weekend discussion was about firms acting like assholes and making it that much more difficult to seduce the next generation of accountants to the profession. Shocking. The words “circling the drain” come to mind. Go weigh in if you like.

Jack Castonguay, who used to be a favorite follow of ours on Twitter before he dipped out from the platform in protest, has written about FTX for CoinDesk:

In situations like this, it’s always easy to play Monday morning quarterback and say this could have happened to any auditor and any client. But here, the failure was idiosyncratic. Prager Metis’ audit failed, and it failed because they didn’t mean the minimum standard for due professional care. And there were signs aplenty. FTX apparently kept its accounting record in Slack channels, personal messages, and QuickBooks. QuickBooks is a fine tool if you are a small business owner just starting out. It’s an unacceptable tool for a complex currency exchange worth billions and should have set off alarm bells for the auditor. Yet it didn’t. Maintaining records in Slack should have raised red flags. Yet it didn’t. The billions in cash transferred between FTX and Alameda should have raised red flags and led the auditor to investigate the relationship further. And yet it didn’t.

These aren’t complex misunderstandings in gray areas. They are clearly identifiable risks Prager Metis should have identified, responded to, and sought more evidence about to ensure the risk of a misstatement were lowered to a reasonable level. Prager Metis, as charged by the SEC, didn’t apply the appropriate level of skepticism to respond to the risks in large part because they seemed to lack the understanding or have the technical knowledge on crypto clients necessary to meet auditing standards.

The SEC’s actions should be warning signs to accounting firms regardless of their involvement in the cryptocurrency or blockchain industry.

Last week:

Kelly Phillips Erb explains in Forbes why private equity is so interested in accounting firms and what accounting firms are getting out of the deal. There’s a nice little chart of firms that have taken or are considering private equity investment:

Ah, I’d been wondering if CRI inked a deal yet. Guess not. Um, they missed BDO no?

Meanwhile, FT published this opinion piece:

Private equity roll-ups of accounting firms could run into trouble

Another worry, noted by regulators, is that private equity ownership could damage audit quality. Maria Nykyforovych, an assistant professor at George Mason University, says the short-term investment objectives of private equity investors could create damaging incentives. Even though regulators require audit businesses to be controlled by auditors, there might be scope for private equity investors to influence the audit practice through interlocked boards or management service fees.

There is also uncertainty over investors’ end game given the difficulties of initial public offerings and trade sales. Private equity, which mostly began investing in 2021, has barely tested the exit routes. Ownership could end up with pension funds, family offices or even return to the partners.

For now, the most likely outcome seems to be a sale to other private equity firms.

And here’s an editorial from Chicago Tribune with no author credited. They inexplicably used a picture of an ERC call center for the article image. There’s really nothing new here, down to the several paragraphs dedicated to talking about Arthur Andersen.

Editorial: Not every finance major can be an investment banker. We need more accountants.

America’s most famously boring profession is in trouble, and that’s bad news for Chicago.

The city is a hotbed of professional services, including lawyers, consultants and the now-endangered species of certified public accountants. CPAs are essential for financial reporting, advanced tax preparation and other dull-but-important tasks that keep the economy going.

…

Yet another challenge is that these days one of the big trends in the accounting world is the interest of private equity firms in grabbing a piece of the business. For generations, accounting firms mainly have been partnerships, governed in ways similar to law firms and other partner-dominated fields. Private equity is becoming a primary means for retiring senior partners to cash out their stakes. How the influx of these outside owners changes the profession remains to be seen. But CPAs will need to push back against any reputation-damaging schemes from their new overseers to boost revenues, a la Andersen.

Consulting, investment banking and other high-paying finance and tech jobs are still competing for the same up-and-coming number crunchers who used to pursue accountancy. Many of these math-savvy young adults see no reason to invest so much time and money into becoming a CPA.

---

PwC is abandoning a $140 million project to build a brainwashing compound in China because of all that Evergrande stuff.

The ambitious project, located at Haitang Bay in the southern island province of Hainan, was intended to be a training facility for “building trust in leadership,” but recent regulatory action has forced the firm to suspend work on the site.

Designed by the architectural firm Gensler, the Reimagine Park campus spanned 16 acres and was set to be a zero-carbon facility comprising nine buildings connected by autonomous electric shuttles. The facility was planned to host the firm’s Trust Leadership Institute in Asia Pacific and aimed to be a symbol of sustainable and innovative leadership in the region.

The project, part-financed by the local municipality, began construction last year and was expected to be completed towards the end of this year.

The government of India is investigating the sudden death of an overworked young woman working for EY:

Minister of State for Labour Shobha Karandlaje has now announced that the government will be investigating the case, stating that justice must be served and employee safety guaranteed. This move follows widespread criticism, with social media igniting discussions about the “toxic work culture” prevalent in large firms like EY, which is one of the four largest and reputable accounting and consulting firms in the world.

Earlier:

We have a couple updates to the above story I’ll get published ASAP.

Meanwhile, across the pond…EY partner pay is going to be disappointing again this year. Smithers, fetch the violins!

Partner pay at EY is set to fall for the second year in a row while senior staff will forgo a pay rise, in a sign that professional services firms are still battling a downturn.

Benoit Laclau, the firm’s managing partner who runs the consulting division for UK and Ireland, told senior managers and directors on a call last week that average partner pay would be down this year, according to EY sources.

The Big Four giant, which provides auditing, consulting, tax and other professional services, also told staff across several of its divisions last week that they would not be receiving a salary increase, which many have come to expect in recent years. Among the staff told that they would not be getting a pay increase were several senior managers and directors, who are below EY’s hallowed partner ranks, in the company’s consulting division.

Have they paid off that $500 million Project Everest hole yet?

According to a recent KPMG report, a majority of CEOs think hybrid work will be dead within the next three years. It was fun while it lasted I guess.

A majority (83%) of CEOs surveyed globally predict that companies will shift to require a “full” return of employees to in-office work in the next three years, an increase from 64% the prior year, KPMG said, reporting on the findings of a survey of 1,300 chief executives conducted in July and August.

The report also revealed a generational divide in the executives’ sentiment on the back-to-the-office matter: 87% of CEOs aged 60-69 predicted a full return to office, 83% of those aged 50-59 expect the shift back to the office to happen while only 75% of chief executives aged 40-49 did so, according to the report. Meanwhile more male CEOs (84%) bet on the full return to office scenario compared to 78% of top female executives.

“This year’s findings reveal that CEOs are hardening their stance on returning to pre-pandemic ways of working,” KPMG said.

In other KPMG news, firearm manufacturer Smith & Wesson has a new auditor:

Smith & Wesson Brands, Inc. (NASDAQ:SWBI), a leader in firearm manufacturing, has announced the appointment of KPMG LLP as its new independent registered public accounting firm, effective September 17, 2024. This change comes as part of a competitive auditor selection process conducted by the company’s Audit Committee, which involved several notable accounting firms.

The decision to engage KPMG was based on a comprehensive evaluation of each firm’s capabilities, responsiveness, and fee structures. Notably, this change does not reflect any dissatisfaction with services provided by the previous auditor, Deloitte & Touche LLP, which had served Smith & Wesson since 2014.

Surely that’s plenty of news for the first Monday of fall?

Please let me know if you spot something interesting, have a tip, or watched a good TikTok cat video (my job gets boring) via email, text, or on Twitter. Text is best, my inbox is cursed with hundreds of emails about the top ten cities in which to eat hot dogs and other such public relations trash.

Have a good week, you.

The post Monday Morning Accounting News Brief: What Could Go Wrong with PE; PwC Abandons a Big Project | 9.23.24 appeared first on Going Concern.

Big 4

Big Four Accounting Firms Ebb as Feeder for Corporate CFO Jobs [Bloomberg Tax]
Long-term recruiting trends show top accounting and consulting firms are slipping as a dominant contributor to the talent pipeline for chief financial officers at big publicly traded companies, though they remain a common launching point. About one-quarter of CFOs at large US-listed companies in the S&P 500 index bring past work experience at PricewaterhouseCoopers and its Big Four firm peers Ernst & Young, Deloitte, and KPMG. Add in other common firms where CFOs have previously worked—such as McKinsey & Co. and Boston Consulting Group—and that figure rises to one-third with an accounting or consulting background. That’s according to an analysis of Bloomberg data on company management profiles, LinkedIn profiles, and corporate leadership biographies.

Earlier: Mother Pens Letter Calling Out EY After Her Overworked Daughter Suddenly Passed Away at 26

Deloitte Forms Committee To Review Employee Practices Amid EY Work Pressure Controversy [NDTV]
Amid a social media storm over the death of a young employee at tax consultancy major EY allegedly due to work pressure, Deloitte has formed a three-member external committee, which includes former revenue secretary Tarun Bajaj, to look into practices, policies and processes concerning employees, its South Asia CEO Romal Shetty said on Friday. Shetty said to manage the work pressure within the organization.

LSBF, Deloitte to create upskilling programmes [International Accounting Bulletin]
The London School of Business and Finance (LSBF) Singapore Campus has partnered with Deloitte to co-develop a suite of upskilling programmes for junior to mid-level professionals in the finance and accounting sectors.

Take a risk? CFOs say now is not a good time [Axios]
Here’s a stunning stat: Only 12% of chief financial officers say that now is a good time to take greater risks, according to a Deloitte survey out Wednesday morning. Why it matters: This could be an indicator of an economic slowdown to come.

PwC looks for way forward in increasingly difficult China terrain [Bamboo Works]
The PwC case also shows how multinationals are coming increasingly under the microscope on government concerns about their potential to pose national security risks amid growing tensions between China and the U.S. Auditing is especially sensitive since it involves access to extensive market data that Beijing worries could be leaked to foreign governments. To avoid that, it has been urging state-owned enterprises to switch to local auditors from foreign ones like PwC. In this regulatory climate, foreign businesses wishing to stay in China have no choice but to walk a tightrope between keeping both their clients and the government happy. And as the Evergrande case shows, sometimes it’s not easy to do both. That can be problematic for the broader China business of a company like PwC, whose other clients have been jumping ship over concerns about the company’s future.

Talent

Are you struggling to find remote accountants, CAS experts, auditors, or tax professionals for your firm or internal team? Accountingfly can help! With Always-On Recruiting, employers can access a pool of top remote accounting candidates without any upfront costs. Sign up now to see the complete candidate list and connect with potential hires. Here are this week’s top remote accounting candidates for your browsing pleasure:

News

Cybersecurity firm flags attack on construction accounting system [Construction Dive]
Ellicott City, Maryland-based cybersecurity firm Huntress has discovered an emerging threat for users of Foundation Software, which bills itself as serving 43,000 construction professionals nationwide. In a Sept. 17 report, Huntress said plumbing, HVAC, concrete and similar subcontractors were actively impacted.
And the company response:
The impacted clients did not follow the protocol of changing their user ID and password, said Mike Ode, Foundation’s CEO, who noted the firm hosts the vast majority of its customers via its software-as-a-service offering. “If you buy a software and you install it at your place, you are responsible for the security and the walls and the perimeter, right?” Ode told Construction Dive. “We’re responsible for what we’ve been selling for the last decade, and that’s a hosted solution.” He urged impacted firms to adopt hosted software instead. “We want everybody in our SaaS-hosted environment, right? Let us do it. Let us take on the responsibility,” Ode said. He asserted the attack mentioned in the report may have impacted just a single client, but acknowledged he didn’t know for certain.

Low bidders bypassed for state contract to probe mystery $1.8B [The Nerve]
A global consulting firm hired by the state [of South Carolina] to investigate the mystery $1.8 billion and related financial questions was not the low bidder for the “potential” $3 million contract, records obtained by The Nerve show. But under state law, procurement officials don’t have to accept the lowest bid but instead can use other purchasing procedures depending on the situation, including issuing a “request for proposals,” which was done by the S.C. Department of Administration in awarding a contract in July to New York-based AlixPartners in connection with the investigation of the $1.8 billion.

People

Ernst & Young names new Denver chief [Denver Business Journal]
The accounting and professional services giant said Andrea Lovelady will take over as Denver office managing partner beginning Oct. 1. Mark Belfance, who held the position since 2016, will retire this year, the company said.

Grant Thornton’s Jessica Knott named one of the Most Influential Women in Business by the San Francisco Business Times [Business Wire]
Jessica Knott, an Audit & Assurance partner at Grant Thornton, has been named one of San Francisco’s “Most Influential Women in Business” by the San Francisco Business Times. Each year, the publication recognizes leaders in the Bay Area for their impact on their industry and the community. “She builds genuine relationships with her clients and colleagues, and her unrivaled tech industry knowledge has allowed her to guide dozens of clients through each evolution of that sector.” Knott is the third consecutive woman from Grant Thornton to receive this award. Melanie Krygier, Grant Thornton’s Private Equity Tax leader, was recognized in 2023; and Rimma Tabakh, Grant Thornton’s market managing principal in San Francisco, received the accolade in 2022.

AI

AI, the infinite intern [Accountancy Today]
So, for the tax and accounting industry, what is the best lens to view genAI through in its current stage? I think it would be helpful for most organisations to think of it as the ‘infinite intern’ – i.e. a round-the-clock resource that is happy to do anything thrown its way, at scale, and has the ability to turn around jobs extremely quickly albeit being prone to frequent errors and therefore requiring close monitoring. When genAI is approached with this mindset, the tasks it is best suited to start to become much more apparent. For instance, while it shouldn’t necessarily be trusted with one-off, high value tasks, it excels at automating routine tasks and reconciling large amounts of data that would otherwise take many hours or even days to get through. Doing so not only slashes the time taken to complete such tasks, but it also frees up tax professionals to focus on strategic activities that are much more valuable to the organisation as a whole.

Live Broadcast: AI and automation in the accounting industry [Accountancy Age]
Tim Baker, CEO of Kloo, and Sean Smith, Accountant Evangelist at Sage, explore the transformative power of AI and automation.

Nisivoccia on AI’s Role in the Changing Landscape of Accounting [New Jersey Business & Industry Association]
On this past weekend’s Minding Your Business on News 12+, Nisivoccia Principal of Client Accounting Services Vicki Kosuda joined host Bob Considine to discuss the upswing of Artificial Intelligence in accounting, and how AI can help improve cash flow planning management for all businesses. Kosuda explained that AI’s ability to rapidly process data will change the nature of how accountants serve their clients. “It’s really going to help the client versus the entering the data, figuring out what happened before, what happened now, compiling the data, to then have those important conversations,” she said.

CFOs juggle strategy, economic pressures in AI push: Billtrust [CFO Dive]
While businesses have rapidly adopted new technologies to improve their customer-facing products and services, back-of-house functions — such as finance — have lagged behind the digitization curve. However, with finance teams under growing pressure to deliver more strategic insights faster, today’s finance chiefs are taking a second look at how they can bring new technologies such as artificial intelligence into spaces like their order-to-cash processes. With finance asked to improve its efficiency, optimize their processes and improve key metrics such as sales outstanding and customer defaults, CFOs recognize “they’re not going to get there by telling people to work harder or throwing more people at it,” Sunil Rajasekar, CEO of accounting software provider Billtrust, said in an interview. “They recognize with the pressures of today, they have to digitize.”

AI driven accounting will replace monthly close by 2030, says research [Verdict]
New research commissioned by global accounting software platform Sage predicts that, by 2030, three quarters of businesses will abandon the accounting practice of the traditional monthly close in preference to AI driven real-time accounting. The research found that 98% of respondents anticipate that AI will improve monthly close accounting efficiency in the next five years, and 54% anticipate an efficiency boost of 20% or more. Some 53% of respondents agreed or strongly agreed that AI would allow them to completely abandon accounting to a monthly close schedule.

Scammers Using AI to Clone Voices, Drain Bank Accounts As Deloitte Forecasts $30,000,000,000 in AI Losses by 2027 [The Daily Hodl]
Cybersecurity expert Thomas Hyslip, who spent two decades in federal law enforcement with the Secret Service and the Department of Defense, says it takes a matter of seconds to create impostor audio. “Historically they had to manually go out and steal credit cards… Now with AI they can take what they already have and use that to enhance their ability to commit fraud… Some of them, you can do [in] as many as 30 seconds. You can clone somebody’s voice and then make phone calls or, you know, use it to try to trick voice recognition. Some of the banks now use voice recognition in place of the phone number.” Big Four accounting firm Deloitte says its base case forecast finds fraud from generative AI will reach $30 billion by 2027, rising from $12.3 billion in 2023.

Meanwhile, in Law

Women Law Professors, Students Across The Country Continue To Receive Creepy Texts From Unidentified 2L [Above the Law]
Back in January, female professors at law schools across the country started receiving strange text messages from an unidentified source who claimed that “law school isn’t fair for us men anymore” because “women always outperform us now.” The next month, as the unsettling messages continued, lamenting how “unfair” it is that “women have clearly won the battle of the sexes,” leaving men as “the losers,” the FBI reportedly began an investigation into the matter. Now, nearly nine months later, the odd text messages are still ongoing, and it’s not just law professors who are receiving them — female law students are, too.

The post Friday Footnotes: Big 4 Isn’t CFO Kindergarten Anymore; Grant Thornton Influences Something; “Completely Brainwashed Slaves” | 9.20.24 appeared first on Going Concern.

Can someone help me come up with a Vault-Tec joke for this story? Because I know it’s right there.

"As it stands today, Deloitte is not known as a shipbuilder, nor is it clear it could meaningfully contribute to the construction of submarines."https://t.co/5uB3rr3nFr

— Going Concern (@going_concern) September 14, 2024

Speaking of Deloitte, the UK business is finally entering the modern age and extending equal family leave to dads:

Deloitte is to equalise its maternity and paternity leave allowance in a move that it hopes will help to boost the number of women in its senior ranks.

From the start of next year, new fathers who work at the accounting and consulting group will get 26 weeks of fully paid leave, the same as new mothers. At present fathers can take only four weeks off with full pay after the birth of their child.

“The evidence is clear about the impact of unequal parental leave on working mothers’ career progression,” Jackie Henry, Deloitte’s managing partner for people and purpose, said. “We know that key moment of the birth of a child sets expectations and an allocation of responsibilities for the future, and traditionally that has fallen to the mother.”

Anyone else kinda shocked this wasn’t the policy already? Get with the times, Deloitte.

Financial Review puts a former EY partner’s business on blast, much to his chagrin:

A former EY partner who allegedly took $700,000 in secret commissions while setting up illegal tax schemes for wealthy clients can be named as Peter White, after he lost a long court battle to keep his identity a secret.

The Commissioner of Taxation is suing Mr White in the Federal Court, alleging he promoted three illegal tax schemes to seven clients in the five years to April 2021, according to a claim lodged in August last year.

Mr White fought for more than a year to stop The Australian Financial Review naming him. He lost two attempts to keep his name suppressed but appealed both times. Last week, he gave up his right to a third bid and suppression was lifted on Monday morning.

The former big four firm partner identified companies that had significant tax losses, then ran his client’s profits through those companies to wipe out large chunks of tax payable, the Tax Office alleges. The structure is called a tax access loss scheme. Mr White is fighting the case.

LOL @ this Bigfoot in the wild pic they included in the article.

And another piece: EY partner sued by ATO was Bill Papas’ former adviser

White was ousted from EY in 2022.

PwC China sent a memo to its people after the news broke last week they’d be receiving the worst fine a Big 4 firm has ever gotten in China:

PwC is making “tangible investments” to ensure the Big Four firm has high quality and sustainable business in China, it said in a memo to staff after Chinese regulators on Friday hit the company’s mainland unit with a record penalty.

“We want to recognise that this has been an extremely challenging period for all of you,” said the PwC internal memo issued late on Friday after the regulatory penalty announcement, and reviewed by Reuters.

“The PwC network has also shown continued support for our China firm throughout this period … They are making tangible investments to ensure we have long term, high quality and sustainable business in China,” it said.

“I know that the coming weeks will not be easy as we put in place a detailed remediation plan and begin to position the business for future success,” the firm’s new China territory head, Hemione Hudson, said in the memo.

And in a related story, more clients started bailing after the fine came down on Friday:

PricewaterhouseCoopers lost five fund clients in a day, mainland media outlet The Paper reported, after Chinese regulators hit its mainland unit with a six-month suspension and a record fine over the firm’s audit of failed property developer China Evergrande.

“Such a severe penalty will have a major impact on the confidence of PwC’s remaining domestic clients,” said Pingyang Gao, an accounting and law professor at HKU Business School. “It is very likely that there will be a mass exodus. So it will likely spell doom for PwC’s business in China.”

Earlier:

• Layoff Watch ’24: Things Aren’t Looking Good at PwC China [UPDATED]
• China Puts PwC in the Punishment Corner For Six Months and Confiscates ‘Illegal Gains’

Private equity across the pond is hoping to unload an accounting business for $660 million:

The private equity owner of Evelyn Partners is preparing to split up the wealth manager by selling off its professional services arm, as it looks to cash in on a wave of investor interest in the sector.

Permira, the buyout giant, is hoping to fetch more than £500 million by selling the division, which includes the business once known as Smith & Williamson. It provides professional services including accounting and tax advice.

Permira is rumored to be one of the suitors interested in purchasing a stake in Grant Thornton’s UK operations.

The Times teased this in July:

The private equity owner of Evelyn Partners, one of Britain’s largest wealth management companies, is exploring options to sell down its £1.5 billion stake.

Permira is sounding out advisers to sell its majority stake in the business, whose activities also cover professional services from auditing and tax advice to insolvency, as it looks to cash in on a wave of investor interest in the sector.

A deal could take the form of an outright sale or a break-up, with Evelyn’s accountancy business likely to appeal to other private equity buyers given the current strong interest in the sector.

KPMG is moving to a smaller office in San Francisco. The Chronicle writes:

Accounting giant KPMG has committed to a new, 100,000-square-foot office in San Francisco once its current lease for its longtime home on Second Street expires.

The New York-based company announced Friday that it will relocate to 505 Howard St., a 10-story building in the South Financial District known as Foundry Square III, in September 2026. A spokesperson described its new lease as “long-term.”

The deal comes after KPMG in March moved to extend its lease at its current office at 55 Second St., which it has occupied since 2003, on a short-term basis of less than three years. Its future home is located two blocks south, near Salesforce Park.

“Our planned move not only reaffirms our longstanding commitment to the city of San Francisco but also demonstrates our dedication to investing in both our people and capabilities to deliver the most innovative solutions to our clients,” said KPMG’s Chris Cimino, a managing partner in San Francisco, in a statement. “This new building, including nearly 100,000 square feet of space for our teams, will provide a superior in-office experience and foster collaboration and creativity.”

The new office will be almost 40,000 square feet smaller than the one on Second St.

FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison and ordered to forfeit $11 billion on March 28 of this year, is appealing. Well, his lawyers are:

The lawyers filed papers with the 2nd U.S. Circuit Court of Appeals asking a three-judge panel to reverse Bankman-Fried’s conviction and assign the case to a new judge for a retrial, saying the trial judge “imposed a draconian quarter-century sentence on this first-time, non-violent offender” after they contend he hurried the jury into reaching a one-day verdict to cap off a complex four-week trial.

“Sam Bankman-Fried was never presumed innocent. He was presumed guilty — before he was even charged. He was presumed guilty by the media. He was presumed guilty by the FTX debtor estate and its lawyers. He was presumed guilty by federal prosecutors eager for quick headlines. And he was presumed guilty by the judge who presided over his trial,” the lawyers wrote.

Hartford Business spoke a few bigwigs at Connecticut firms to hear how smaller firms can keep their souls amidst the current wave of private equity investment and merger mania. This is to Drew Andrews, managing partner and CEO of Whittlesey in Hartford:

Firms must embrace new technology that will increase efficiency and workflow, he said, including automation and artificial intelligence, which is already being used in the industry.

“We have to automate processes and stay ahead of technological advancements,” Andrews said. “I’m not just looking at what’s coming down the line next year, I’m looking at 10 years down the road. The firms that don’t modernize will become obsolete.”

Firms would be wise to seek the input of more junior employees on technological advancements.

“The younger generation often has valuable insights into using technology more effectively,” Andrews said.

And that’s the news! Email, text, or tweet if you come across an interesting story or just want to chat. My virtual inbox is always open…because someone keeps forgetting to close the door and any old riff-raff can just wander in.

The post Monday Morning Accounting News Brief: What Could Go Wrong Giving Nuke Power to Deloitte; KPMG SF is Moving | 9.16.24 appeared first on Going Concern.

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:

pic.twitter.com/AbEqNCE9gm

— 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.

The post Friday Footnotes: Someone Hates the Quality Control Standard; EY Associate Doesn’t Care; Deloitte Doesn’t Build Ships | 9.13.24 appeared first on Going Concern.

Here’s a fun read from Business Insider: I’m happy I got laid off from Deloitte. The physical and mental toll wasn’t worth the paycheck.

25-year-old former analyst Cierra Desmaratti, who spent a year at Deloitte before she was laid off, says:

I was onboarded at Deloitte’s Chicago headquarters in September 2021 alongside 80 to 90 fresh hires. I remember looking around at my peers dressed in pressed suit jackets and designer pieces and feeling immediately out of place. The T.J. Maxx clothes I wore had been a splurge, but I no longer felt like they were adequate.

I tried making small talk with those around me and quickly realized appearances weren’t the only way I stuck out. Everyone seemed to be bonding over their big-name colleges and Big 4 internships, exchanging anecdotes I simply couldn’t relate to.

…

At one of my first happy hours, I was sitting at a table with colleagues when a senior consultant remarked that intelligent people wouldn’t bother engaging in silly things like crystals and astrology. Taken aback but eager to engage in some playful discourse, I mentioned I considered myself intelligent but also quite intuitive and spiritual. The table fell silent until the senior consultant awkwardly acknowledged my comment and changed the subject.

That moment, though small, reinforced the idea that my success in the workplace was contingent upon my ability to acquiesce to the social norms. I honestly didn’t feel like there was a way to thrive in a more masculine environment without entirely abandoning my femininity, so I tucked away my spiritual, bubbly side.

While I suspect not many readers can relate to the woo anecdote, surely most can relate to this part:

As the busy season ramped up in January, work became all-consuming. I started working 11-hour shifts and immediately felt myself barrelling into burnout.

I didn’t feel safe confiding in anyone about my workload concerns because everyone around me seemed to wear their burnout as a badge of honor. I’d see my boss work long hours and hear colleagues laugh off the stress, saying, “That’s just Deloitte.”

Related to the above tale, Kimberly Tara, Founder & CEO of The Tara CPA Firm LLC in New Orleans, talks to the Cincinnati Business Courier about her early days in public accounting:

After an abrupt switch to accounting from chemical engineering far too late into my college career, I knew I had finally found my calling. What I didn’t realize was how male-dominated the public accounting world still was; but I soon realized why.

In my third busy tax season, I watched a pregnant manager in the tax department FaceTime her child to sleep for the fifth night in a row. That was the moment that I realized public accounting — more specifically making partner in a public accounting firm — was no longer my goal.

Finance teams have just five years to transform or risk becoming irrelevant, according to a new report by ACCA (the Association of Chartered Certified Accountants) and Chartered Accountants ANZ in association with PwC:

Drawing on insights from over 150 finance professionals and 2,300 survey responses, the report shows that businesses now demand a broader skill set from their finance teams, as retrospective reporting and traditional approaches to planning and forecasting alone no longer meet key decision-makers’ needs. Being pre-emptive is the order of the day. 

The report highlights some ongoing concerns raised by survey respondents:

• A lack of clarity on how finance can add value to the business (38%)
• Finance being seen mainly as a cost center (32%)
• Current technology not meeting the needs of the organization (30%)

CFO wrote up the results of the Jefferson Wells’ 2024 Internal Audit Priorities survey:

More than two-thirds (66%) of internal audit teams say their capabilities do not fully align with their organization’s priorities.

With a large portion of CFOs already outsourcing many of their accounting functions, it’s no surprise that internal auditors have seen a stark rise in organizations using external support to supplement areas where their labor or technology can’t get the job done alone.

Nearly three-quarters (74%) of internal audit leaders say they’re now using external support to meet demands. That’s up 54% from 2023. It’s worth noting that the trend before 2023 was declining slightly year-over-year, down approximately 2% in 2022 and 6% in 2023.

BDO Global has walked away from messy Indian education technology company Byju after the client failed to provide the right paperwork (that sounds way less messy than it actually is, btw), reports Reuters:

Byju’s is fighting several battles including the insolvency proceedings and a $1 billion claim from U.S.-based Glas Trust.

BDO was appointed auditor earlier this year after Byju’s’ former auditor, Deloitte, left the company, citing several issues with the company’s financial reporting.

The auditor said in a letter to the company dated Tuesday that despite “inordinate” delays in filing its financials for the year ended March 2023, management had provided inadequate support to complete the audit.

Byju hit back and said that BDO made the mistake of trying to get the documents from the company’s board, which has been suspended.

The letter should have been addressed to the insolvency professional in control of the firm at the time, the edtech firm said.

Byju CEO Byju Raveendran claimed the auditors requested a big no-no:

Byju’s audit firm BDO had suggested backdating of reports, which the company refused, and their resignation is more of optics, a top official of the edtech firm alleged on Saturday.

“They have asked us to do multiple backdating of reports. All that happened recently. We did not agree. We have nothing to hide,” he said.

ICYMI: EY UK might appoint a woman to lead the firm and of course the media is making a BFD out of this.

In 2023, EY named Janet Truncale as its next chief executive officer. The move was a landmark appointment at the top table of the professional services industry – with none of the Big Four auditing and advisory firms having previously been headed by a woman beyond an interim capacity.

They must mean a Big 4 firm has never had a woman CEO on a global capacity because, uh, Deloitte’s Cathy Englebert exists and she became the first woman to lead a US professional services firm almost ten years ago. Is she still commissioner of the WNBA? remind me to look that up later.

One year on, EY could be about to see the same thing in its UK practice. EY’s UK business is the second-largest firm in its international network, behind the US – and to date, it has never had a woman in its top role. But a shortlist on which two-thirds of the candidates are women suggests this could be about to change.

Consulting.uk gives a nod to PwC’s leadership contest (see also: People Are Accusing Middle East Partners of Sexism in the Senior Partner Vote at PwC UK from us) and suggests Middle Eastern partners won’t be blocking any women this time.

Earlier in 2024, meanwhile, PwC also looked poised to appoint a woman to its top role with two women on another three-person shortlist. However, the firm eventually plumped for Marco Amitrano as its new UK and Middle East chief instead.

Despite the conservative stylings of its rivals, however, the EY selection process differs from PwC’s, so it would be wrong to assume a similar outcome this time on that basis just yet. While PwC allows all of its partners to vote in leadership elections, the succession process at EY sees an elected partner forum and the firm’s international bosses given final say.

See also: EY draws up female-dominated shortlist for top UK job from FT.

Philip Morris commissioned KPMG to do a study on fake cigarettes. Not the fun kind.

Philip Morris International Inc. (PMI) (NYSE: PM) today warns about the high levels of contraband and counterfeit cigarettes in the European Union (EU) year over year, with 35.2 billion illicit cigarettes consumed in the region in 2023, accounting for 8.3% of total consumption in the EU, an increase of 0.1 percentage point compared to 2022.

PMI praises European law enforcement agencies for their continued crackdown on criminal networks that profit from the illicit tobacco trade, and calls on regulators to advance a sensible, data-driven policy approach that puts consumers—and public health—front and center and that effectively addresses the challenges posed by the millions of adult smokers who are turning to the black market rather than quitting or, for those who do not quit, switching to smoke-free products.

The results of the 2023 KPMG annual study on illicit cigarette consumption, commissioned by Philip Morris Products SA, revealed that the illicit market in the EU continues to be a major threat for public health, public security, and states’ economies.

Illicit cigarette consumption in Europe [PDF]

BF Borgers is in trouble again but honestly, who cares? I’m half hoping this guy has the balls to show up somewhere and start trying to practice somewhere again.

Canadian Accountant:

One year after reaching a $1.2M settlement with American accounting firm Marcum LLP over unlicensed work, CPA Ontario has prosecuted an American firm, BF Borgers CPA PC, and its principal, Ben Borgers, of Lakewood, Colorado, for offences under the Chartered Professional Accountants of Ontario Act, 2017, and the Public Accounting Act, 2004.

Borgers and the Firm pleaded guilty to engaging in public accounting work in Ontario, including performing the audit of a reporting issuer, without registering with the Chartered Professional Accountants of Ontario or holding a Public Accounting License in Ontario.

In May: The SEC Just Charged Trump Media’s Spelling-Challenged Auditor with “Massive Fraud”

OK that’s it. Seeing a lot of discussion about PwC UK’s return-to-office happening in non-accounting corners around the internet, we’ll be talking about that shortly. If you see something interesting, have a topic we should cover that we aren’t, have a tip to share, or just want to complain, feel free to reach out via email or text any time.

Follow us on Twitter/X for the usual lukewarm takes and if you’re so inclined, sign up for the newsletter to get headlines in your inbox every Tuesday and Friday.

The post Monday Morning Accounting News Brief: I’m Happy I Got Laid Off From Deloitte; Finance Teams About to Be Irrelevant | 9.9.24 appeared first on Going Concern.

You’ve Got to Be Kidding

How To Make Accounting Cool Again [Forbes]
Oh here we go with this shit again. The best part of this article:

Academia

Navigating New Age of Accounting Means Balancing Books and Bots [Bloomberg Tax]
University of Richmond professor Robert Pawlewicz writes:
The accounting profession today isn’t the one I entered in 2000. It’s not even the profession that some of my students entered just six or seven years ago. Technology enhancements, including analytics and generative artificial intelligence, a dwindling pipeline of accounting students, and a generational shift in the population of accountants have forced structural changes on what has been typically seen as a hidebound and stodgy profession. The good news is universities that educate future accountants are adapting to this brave new world so their graduates can handle these new demands.

Former audit partner at Grant Thornton joins college as executive-in-residence [Marquette Today]
The College of Business Administration has added Gregg Rusk as its latest executive-in-residence in accounting. Rusk spent 35 years working at public accounting firm Grant Thornton, with 23 of them as a partner. During that time, Rusk advised more than 50 public companies and their boards on audit, internal controls and accounting issues. He assisted clients with initial public offerings that raised over $2.5 billion, public and private debt offerings totaling $10 billion, along with over 75 mergers and acquisitions. He worked at GT’s Chicago, London and Miami offices. He specialized in international companies and traveled and worked in 50+ countries across six continents.

News

Donald Trump says he’ll task Elon Musk with auditing the entire federal government [The Verge]
Former President Donald Trump says that if reelected, he’ll create a government efficiency task force — and that Elon Musk has already agreed to lead it. During a speech in New York on Thursday, Trump said the new efficiency commission would conduct a “complete financial and performance audit of the entire federal government” and make recommendations for “drastic reforms.”

Labor market isn’t breaking down but it’s ‘skating on thin ice,’ says KPMG’s Diane Swonk [CNBC]

Ultra-Rich Families Set to Control $9.5 Trillion by 2030, Deloitte Says [Bloomberg]
The wealth of ultra-rich families will likely swell to $9.5 trillion by 2030, according to estimates from consultancy Deloitte, as family offices grow and morph to rival hedge funds. The figure would mark a 73% jump from the current $5.5 trillion controlled by people represented by family offices, according to the report. The number of investment firms for the wealthy is expected to grow by one-third over the same time period, to 10,720.

Pawhuska financial auditor resigns [Pawhuska Journal-Capital]
The Vinita-based accountant that the City of Pawhuska engaged to perform its 2022-2023 audit [for a cost of $12,000] resigned, leaving the job more than eight months late and unfinished. City Manager Jerry Eubanks said he was informed by telephone Thursday, Sept. 5 by City Attorney John Heskett that the auditor, David Clanin, had resigned. Clanin was tasked with completing the 2022-2023 Pawhuska audit which was due to the state auditor and inspector by Dec. 31, 2023. With the report unfinished, the state is withholding the monthly remittance of gasoline tax revenue to the city. “I guess we’re going to have to find someone to do that audit,” Eubanks said. It is probable that this will mean a new auditor will have to start the job all over again, he said.

Earlier: Late financial audit frustrates Pawhuska city officials, complicates city budget

Big 4

Deloitte, top executive part ways over ‘conflict of interest’ [The Economic Times]
Professional services major Deloitte India has parted ways with its turnaround and restructuring services leader, Sumit Khanna, due to concerns related to a conflict of interest, multiple sources familiar with the situation told ET. “Deloitte conducted an inquiry for almost two months after an anonymous letter was received detailing certain allegations against Khanna. Both parties decided to part ways after this inquiry, which included clarifications sought from his side as well,” said a person aware of the case.

KPMG and Stephen Curry’s UNDERRATED Golf Ring the Opening Bell [Nasdaq]
UNDERRATED Golf is a purpose-driven business endeavor with the overarching commitment to providing equity, access and opportunity to student-athletes from every community.

Are you an ethical tax advisor? If not, watch out! [Deloitte]
More fallout from the PwC tax scandal. Way to go, P-Dubs, way to go.
The International Ethics Standards Board for Accountants (IESBA) tax planning project has culminated in a framework of expected ethical behaviours for accountants providing tax planning services and a new Ethical Standard for Tax Planning (the Standard). The Standard applies to ‘tax planning services’ and related activities. This does not include tax evasion, which is illegal, and covered by existing Code of Ethics standards. Instead, ‘tax planning’ covers advisory activities that assist an employing organisation or a client in planning or structuring affairs in a tax-efficient manner. Different sections apply to members in business who perform tax planning activities and members in public practice who provide tax planning services. This distinction essentially separates accountants who perform the in-house tax function of an organisation (‘in business’) and accountants employed by advisory firms (‘in public practice’).

Deloitte leases 80,000 sq ft space in Oberoi Commerz building in Mumbai for ₹2.09 crore per month [Hindustan Times] ₹2.09 crore = $249k USD. Deloitte Shared Services India LLP has leased 80,849 sq ft of office space at the Oberoi Commerz III building in Mumbai at a monthly rent of ₹2.09 crore a month, according to the leave and license agreement shared by Propstack. The space spread across two floors has been leased for five years. Terms of the deal include a 15% escalation in rent after 36 months. The starting rent works out to be ₹258 per sq ft per month, the documents showed.

Not Big 4

Meet the 2024 Best Midsized and Large Firms to Work For [Accounting Today]
Each year, Accounting Today and Best Companies Group select the Best Accounting Firms to Work For. This slideshow includes the best in the Midsized Category (firms with between 50-249 employees) and the Large Category (250 or more employees) with their rankings and select information on the firms, as well as photos the firms submitted themselves (or, occasionally, their website).

EY draws up female-dominated shortlist for top UK job [Financial Times]
EY has drawn up a female-dominated shortlist of candidates to succeed Hywel Ball as the firm’s UK managing partner, laying the groundwork for a contest that could produce the first woman to become the permanent head of a Big Four accountancy in Britain.

Binance Hires UK-Based Accounting Firm Grant Thornton to Advise on Audits [CoinDesk]
Binance has hired U.K.-based Grant Thornton’s Singapore devision to advise on accounting and tax matters, it announced Wednesday. The crypto exchange previously worked with auditing firm Mazars to produce a proof-of-reserves report for crypto clients, however, Mazars in December 2022 said it had paused work with Binance and other crypto clients amid concerns over the public’s misunderstanding of those reports.

Marcum Announces 15 New Partners Across the U.S. [Marcum]
Jeffrey Weiner, Chairman & Chief Executive Officer of Marcum, praised the newly appointed partners, stating, “These individuals represent Marcum’s dedication to excellence. They bring a wealth of experience, skill, and an entrepreneurial spirit. In a rapidly evolving world, they have shown adaptability and dedication to understanding and exceeding our clients’ expectations. On behalf of the entire firm, I congratulate our new partners on this well-deserved achievement.” The new partners assumed their roles September 1.

Relatable

Justice Jackson Had ‘Wrenching’ Time as Big Law Working Mom [Bloomberg]
Supreme Court Justice Ketanji Brown Jackson described her return to law firm life after the birth of her first daughter as “wrenching,” saying she “drastically underestimated the challenges of new motherhood.” “I can honestly say that going back into the office as a new mother, and returning to the cadence and pressures of Big Law, was the stuff of nightmares,” Jackson said in her memoir, “Lovely One,” which was released Tuesday.

The post Friday Footnotes: The Least Disingenuous Senior Partner; Accounting Education Evolves; KPMG Rings a Bell | 9.6.24 appeared first on Going Concern.

Evidently Deloitte uses Canva. Consulting.com.au explains that Deloitte has “struck up a ‘first-of-its-kind’ strategic alliance with Canva” but it’s unclear what that actually means from the article because they’re using too many of those meaningless buzzwords.

Deloitte said that in delivering consistent and unified branding and content, the alliance would enable seamless collaboration across client’s different business units to boost both productivity while also reducing costs.

According to Canva’s own research, over 90 percent of employers now expect their employees to have design skills and knowledge, with visual communication having become “the status quo across every industry and profession.”

“We’re very excited to be entering into this Australian-first alliance,” said Deloitte CEO Adam Powick. “The enterprise landscape is more complex than ever with productivity pressures and technology advances in key areas like GenAI. In this environment, business leaders need to rethink how their teams work, collaborate, and communicate to get the full benefits of new technology.”

And:

Canva has been widely praised for simplifying the design process, and now attracts almost 200 million active users worldwide.

Among those active users, according to Powick, are the teams from Deloitte…

“The alliance will see Canva’s single solution platform combined with Deloitte’s digital transformation expertise to provide whole of business solutions and benefits focused on improving productivity and lowering operational costs,” said Deloitte.

Journal of Accountancy has published “Rewriting accounting’s employment narrative,” an article that has been written many times before but this one has the words moved around.

Disappointing employee experiences are harming the image of the accounting profession, the National Pipeline Advisory Group (NPAG) report concluded. To reverse the narrative, starting salaries must increase to become competitive with other professions looking for top talent, and employers must make workloads more manageable, work more interesting, and career paths and rewards clearer.

Well good, at least they aren’t suggesting the narrative is wrong.

Other incentives that promise to attract more high school and college graduates to the accounting profession are work experiences that offer career stability, work/life balance, positive environmental impacts, and a culture that embraces diversity, equity, inclusion, and belonging, according to the NPAG report.

They just won’t let this go, will they? The answer is right before their faces:

Starting salaries that are not competitive are among the biggest contributors to the talent shortage in accounting. NPAG’s national survey identified raising starting salaries as the most effective tactic to encourage people to choose an accounting career — 84% of professionals and 85% of students agreed.

Notice how articles like these always use the word “perception.” Common perceptions exist for a reason. Young people don’t mistakenly believe the hours in accounting are long because they saw a TB4A meme about it, TB4A makes memes about it because the hours are long.

Relatively low starting pay is one thing. Relatively low starting pay for long hours is worse, which, unfortunately, is the common perception of the profession. But accounting firms are also taking steps to tackle the overtime. Increasingly, they are trying to tame the busy season in an effort to counter the idea that accountants must work excessive overtime to meet tax and other deadlines.

“The idea.”

EY’s parading out its attitude toward neurodiverse talent again. Writes Fortune:

Neurodivergent workers have often been overlooked as a key source of talent, but more employers are waking up to how important that talent pool is. One company has been investing in its neurodiverse employees for nearly a decade—and it’s proving to be a huge business win.

Karyn Twaronite, global vice chair of diversity, equity & inclusiveness for EY, tells Fortune why accessing and supporting neurodivergent workers became a huge focus of her inclusivity and talent acquisition efforts.

“My first rationale was, I wanted to have the greatest access to the talent pool and technology skills. I wanted to expand our access beyond what we had,” she says. “They happen to be a very highly underemployed population around the world. The primary benefit was that I wanted greater and better technology skills within the EY workforce, and this has afforded us that.”

Allow me to leave this here:

Excerpt from that first-person essay about one person’s experience at the EY Neuro-Diverse Center of Excellence:

We were treated like a monolith kindergarten class.

We were forced into the same stereotypical accommodations whether we requested them or not, whether we needed them or not. We were made to work in a segregated office space. There were the regular HR rules and other unwritten rules we learned by getting caught out, like spending too much time in the mini conference room or asking too many questions.

And when our program managers weren’t choosing to infantilize and isolate us, they went the other way and paraded us around, selling the program and those of us in it like a circus act, on display, forcing us to identify ourselves by the program and therefore our diagnoses, too (which violated our rights to medical privacy.)

India’s audit regulator may no longer go soft on violators, according to Mint:

New Delhi: When India’s audit regulator imposed a fine of ₹10 crore on Coffee Day Enterprises Ltd’s auditor last month, it was among its highest so far—a fraction of global penalties.

As India’s National Financial Reporting Authority enters its seventh year, the extent of penalties for audit failures could shoot up particularly in instances of repeated non-compliance, said a person with knowledge of NFRA’s penalty regime.

“Penalties ordered by NFRA have been on the lower side in comparison to that of its global peers because it is early years for the independent regulator in India, and it is expected that compliance will improve and a situation doesn’t arise where NFRA also has to consider penalty at par with the level seen globally,” this person said, declining to be identified.

₹10 crore is about a million bucks.

Counterpoint from that article: “We should keep in mind the big differences in per capita income and earning potential in India and in the developed markets when examining the penalties to be imposed,” said a senior auditor, who spoke on condition of anonymity. “The audit regulator should handhold, do more inspections of audit firms, give them time for remediation of the deficiencies, and only after that consider penalties.”

From Kiplinger: A Private Equity Fund Bought Your Accounting Firm: Now What?

What’s in it for firm leadership?

The payday and the promise of more. When PE firms focus on a sector and start competing for acquisitions, earnings multiples to buy a company in the space tend to rise sharply.

It’s hard to get a clear picture of the exact EBITDA multiples PE firms are paying to buy into accounting firms, but the liquidity opportunity from this wave of acquisitions is widely considered to be more robust than the industry has seen before.

Alternatively, for owners who have been looking to grow their firms, PE firms tend to love founders who stay and drive investments in new acquisitions to complement their existing firm. There can also be synergies from outsourcing, technology and cross-ownership of accounting and wealth management firms.

Professional services firms have also long struggled with succession, and PE can play a big role in that. As owners of these firms age out, PE firms are more than happy to provide capital to allow for generational succession where younger members of the firm buy out older members’ partnership interests.

A managing director at an employee-owned firm thoroughly answers the question “Is employee ownership right for my firm?” in Accountancy Age:

Employee ownership can be a powerful tool for succession planning, particularly in accountancy firms where the alignment of stakeholder interests is crucial. For firms like ours, an EOT offers a solution that preserves the firm’s independence while ensuring that those who contribute to its success are directly rewarded.

However, the suitability of an EOT for your firm depends on several factors. For instance, firms operating as partnerships or LLPs would need to transition to an incorporated entity to fully leverage the tax benefits associated with an EOT. Additionally, firms involved in regulated activities, such as audit services, face specific regulatory challenges, as registered auditors must be owned and controlled by qualified auditors. This could necessitate restructuring certain aspects of the business, which may not be feasible or desirable for all firms.

Beyond the structural considerations, the financial health of the business is a critical factor. Firms that require significant capital for growth or investment might find the EOT structure limiting, as raising external funding can be more complex under this ownership model. It’s essential to weigh these considerations carefully before making the transition.

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An ex-director who went out on her own and ambitiously tried to poach her former firm’s clients found herself in an Australian court:

A Victorian accounting firm has won a temporary injunction to prevent a former employee who set up a rival practice from poaching their clients.

Mount Waverly-based Oakwood Partners told the Federal Court it could face irreparable injury unless accountant Manlin Li was barred from soliciting long-term clients offering them cheaper tax services.

Li resigned at the end of January and by February, she was all up in that Rolodex soliciting clients.

Affidavits showed that she told clients she could prepare tax returns for “half price” and that “she would do a better job” than Oakwood.

Grant Fraser, an Oakwood client, deposed that “Ms Li offered to provide him with accounting services at a 20 per cent discount on what Mr Fraser was currently paying for services”.

Li argued that Oakwood’s clients were her personal intellectual property and that without her, the firm “was only a shell”.

In what appears to be a thinly veiled ad for a local accounting firm in a news site focused on a particular area of Wales, a director gives a glowing review of one of the young employees. Don’t you wish your directors talked about you like this?

Coxey’s director Joanne Evans said: “Molly has a natural affinity with all things accountancy related. It’s like her brain just automatically tunes in and understands whatever issue we are talking about at the time. We are all so proud of her, she’s a real ray of sunshine, a great personality to have around the office, everyone loves her.

“Young accountant spearheading major drive to boost the numbers at fast-growing firm,” Deeside.com Sept 2, 2024

And that’s enough of that! We’ve got a couple interesting items to write up today that were not included in this news brief, you’ll see those shortly. Please let me know if you have seen a story we should be talking about, are privy to some drama going down at your firm, or anything else via email, text, or Twitter. Bye! Love yooou.

The post Tuesday Morning Accounting News Brief: Deloitte Partners With Canva; Gaslighting Our Way Through the Shortage | 9.03.24 appeared first on Going Concern.

News

Morris County Native Michael Brown, 23, Was Set To Begin New Job At EY, Obituary Says [Pascack Daily Voice]
According to his obituary on the William Leber Funeral Home website, Michael graduated from  West Morris Central High School before earning a degree from the University of Alabama. He was set to begin a new job at EY in Atlanta, GA. He had checked off an item on a summer bucket list this year, hiking across national parks along the West Coast, camping out or sleeping on a friend’s couch, Michael’s obituary reads.

North Jersey man sues law and accounting firms, says they padded his bills to nearly $2M [NorthJersey.com]
An Oradell man is suing the law firm Sills Cummis & Gross PC and accounting firm CohnReznick, alleging the two entities padded his total bills to nearly $2 million. In the four-count suit filed Aug. 26 in state Superior Court in Passaic County, Richard Hekemian alleges that Sills Cummis & Gross, based in Newark, “overcharged and overbilled” him, including through double and multiple billing “for the same legal services, or simply ‘padding’ the invoices.”

Accountancy firms fight back against audit reforms [Financial Times Opinion]
A new rule agreed by the US audit regulator, the Public Company Accounting Oversight Board, will force each of the biggest firms to establish a body to oversee quality control, and to make sure at least one person on it comes from outside the firm. The rule is part of a broader revamp of quality control standards that the industry wrote itself decades ago and which are only now being updated by the PCAOB, some 20 years after the agency was created following the Enron scandal. A number of big firms, including PwC and BDO, are trying to kill the rule at the eleventh hour in a move that has raised eyebrows among some investor groups, which point out that many firms already boast of having bodies that sound a lot like what is being proposed.

Practice Management

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Check out this week’s top remote accounting candidates here:

How CPAs can bring order to a disorderly world [Journal of Accountancy] PCAOB Board member Christina Ho wrote something for JofA. We just want to share this unironic graphic:

Survey Says

2024 Internal Audit Priorities Survey Reveals Technology and Cybersecurity as Top Concerns Amidst Rising Generative AI Adoption [PR Newswire]
Jefferson Wells, a leading professional services firm specializing in Finance & Accounting, Internal Audit, Risk & Compliance, and Tax, and part of the ManpowerGroup family of brands, released the results of its eighth annual Internal Audit Priorities Survey. The survey reveals that while cybersecurity remains the top risk, the rise in the usage of Generative AI tools is escalating in risk priority for IA leaders and audit committees. Despite this, only 26% of organizations have fully integrated Generative AI standards into their governance framework, indicating a need for more comprehensive controls. Business Transformation and IT Deployment risks necessitate more in-depth internal audit skillsets in cybersecurity, data analytics, IT audit, and Generative AI, which are the most challenging to train and retain. Consequently, 37% of organizations are planning to increase staff to meet the heightened demand for these technology skills – the first significant increase in internal audit departments planning to expand their teams since 2020.

Associations Are Financially Optimistic and Developing their Tech Spend, According to New Wipfli Survey [PR Newswire]
According to Wipfli’s 2024 State of Associations Report, professional and trade associations alike show strong resilience and optimism about their markets, with finances and memberships up from the past year. Associations face several challenges within their space, and sometimes merging with similar organizations can help them better serve their members, leading 77% of respondents expecting to merge or consolidate with other associations in the next two-to-five years. Overall, while associations work within countless different verticals, common threadlines such as adaptability in changing scenarios, revenue streams, recruitment & retention issues, and technology concerns were present for associations of all sizes.

Municipal News

Village clerk of tiny Nebraska town resigns amid probe by state auditor’s team [Nebraska Examiner]
The village of Litchfield in central Nebraska “boasts a whopping 280 people,” according to its website, which goes on to say that the small-town atmosphere contributes to a high quality of life. But a Nebraska State Auditor’s Office probe into village operations has disrupted the calm, revealing apparent misappropriation of public funds, inaccurate utility billings and lack of documentation. Auditor Mike Foley, when releasing results, zeroed in on fiduciary responsibilities despite the size of a municipality. He said that “for various reasons” proper financial controls can sometimes be “less vigorous” among smaller political subdivisions.

Missouri state auditor granted new authority over local governments [StateScoop]
Starting Wednesday, under House Bill 2111, which Gov. Mike Parson approved in July, the Missouri state auditor will have the authority to conduct audits of local and municipal government organizations, including larger counties like St. Louis and Jackson, where most of Kansas City is located. “What we found over the years is that a lot of the fraud is in those smaller political subdivisions, because they have fewer internal controls, they have fewer employees, and they’re just in an environment that makes it easier for people to steal money,” Missouri State Auditor Scott Fitzpatrick told StateScoop in a recent interview. “House Bill 2111 will give us the ability to initiate audits of those political subdivisions, which we currently cannot do unless we get a petition from the citizens of the of that area.”

PA Auditor General releases audit claiming taxpayers were overcharged for prescription drugs [WTAE]
Pennsylvania’s auditor general released the findings of an audit on Wednesday, claiming taxpayers were overcharged for prescription drugs in 2022. “We found that $7 million in transaction fees were not disclosed by PBMs and MCOs (managed care organizations) to DHS (Department of Human Services), DHS then used this inflated data to set the rates it will pay in the future for prescription drugs,” Auditor General Timothy DeFoor said.

Audit finds Marshall County Fiscal Court had misreporting issues on financial statements [WPSD]
In a news release, Kentucky Auditor Allison Ball’s office said auditors tested 67 disbursements totaling more than $5.6 million. According to the auditor’s office, issues found included: Nineteen disbursements totaling more than $1.5 million that did not have a purchase order; Fifteen disbursements totaling more than $2.5 million that had a purchase order that was dated after the invoice date; Five disbursements totaling more than $2. 8 million that did not appear to be paid within 30 days because the invoice was not stamped when it was received; Five disbursements totaling $14,826 for utilities that were not approved by the fiscal court before being paid and were not included on the preapproved reoccurring expenses.

Firm Watch

After private equity investment, Meridian accounting firm signs deals with two other firms with Boise operations [BoiseDev]
Harris CPAs acquired Medford, Oregon-based KDP & Co., LLC, as well as Boise-based firm Chigbrow Ryan Murata, Chtd. KDP operates in the Boise area as well after a 2021 acquisition of Boise-based Whittaker & Associates. Harris President Josh Tyree told BoiseDev that the deals are more of a merger – and each of the former owners in KDP and Chigbrow Ryan remain as owners in Harris. “We’re not looking for any firm that’s just breathing, we are looking for firms that are servicing similar types of clients. We want to stay true to those things and get to some strength in numbers, we’re going to be more successful.”

Accounting firm in lease talks for Ballantyne office move, training center [Charlotte Business Journal]
Minneapolis-based CliftonLarsonAllen plans to take two floors in an unidentified Ballantyne building. Work on that 50,000-square-foot space is expected to be complete by December 2025. The firm’s Charlotte office is now in the Carillon building at 227 W. Trade St. About 250 CLA employees are expected to be located in the new space. Half of the space would be designated for office use. The other half would be used for what the company defines as a “connection center,” designed to help CLA grow and retain talent. It’s intended to bring employees from across the Charlotte area and the company under one roof for learning, development, continued training and more. CLA plans to host 150 to 200 employees at a time within the new space.

Meet Houston Business Journal’s 2024 Most Admired CEO Awards honorees [Houston Business Journal]
Bill Hickl, Texas Market Managing Principal (Tax) at BDO gets admired.

The 2024 MP Elite [Accounting Today]
To contend with a rapidly changing landscape, today’s top accounting firm leaders are required to wear more hats than ever before. Besides embodying the attributes of any great business leader, they often must serve as technologists, deal brokers, and brand ambassadors — not just for their firms but for an entire profession in dire need of attracting more young talent. PE, mergers and acquisitions, and artificial intelligence are all hot topics for the MP Elite, and it is their curious but mindful approach to these industry trends that make them role models in accounting.

Big 4

China Has Another Firm in Its Crosshairs Over Its Epic Property Bust: PwC [Wall Street Journal]
China’s epic housing bust has crushed big developers, bond-market investors and homeowners, causing billions of dollars in losses. Now Chinese regulators are zeroing in on another important player: PricewaterhouseCoopers, the auditor of choice for many of China’s biggest property firms.

Judge Rules $400 Million Algorithmic System Illegally Denied Thousands of People’s Medicaid Benefits [Gizmodo]
Thousands of Tennesseans were illegally denied Medicaid and other benefits due to programming and data errors in an algorithmic system the state uses to determine eligibility for low-income residents and people with disabilities, a U.S. District Court judge ruled this week. The TennCare Connect system—built by Deloitte and other contractors for more than $400 million—is supposed to analyze income and health information to automatically determine eligibility for benefits program applicants. But in practice, the system often doesn’t load the appropriate data, assigns beneficiaries to the wrong households, and makes incorrect eligibility determinations, according to the decision from Middle District of Tennessee Judge Waverly Crenshaw Jr. “When an enrollee is entitled to state-administered Medicaid, it should not require luck, perseverance, and zealous lawyering for him or her to receive that healthcare coverage,” Crenshaw wrote in his opinion.

What Big 4 do you think is the most morally corrupt?
byu/marihuano69x inAccounting

KPMG Recruits Veteran CPAs to Advise on AI in Audits, Quality [Bloomberg Tax]
KPMG LLP will lean on the expertise of three veteran accountants to advise the firm as it navigates the use of artificial intelligence in its audits and a ream of US rule changes. A three-person Independent Audit Quality Advisory Committee will provide outside input on how the firm responds to regulatory inspections. The committee will also help the firm as it measures progress toward strengthening the quality of its audits and builds on its adoption of AI, KPMG said Wednesday.

KPMG announcement: KPMG US Announces Formation of Independent Audit Quality Advisory Committee to Build on the Success of Quality Initiatives

You thought you knew the PwC saga. But did you know the firm released a cartoon book on its values featuring various blobs? My favourite page is this one, which presumably shows tax tweeties whispering secrets into ears pic.twitter.com/io4lPMP0g0

— Myriam Robin (@myriamrobin) August 4, 2024

The post Friday Footnotes: CPAs Need to Get Contemporary; Internal Audit Priorities for 2024; A PwC Comic Book? | 8.30.24 appeared first on Going Concern.

Several private equity firms are considering offers for a stake in Grant Thornton’s UK business, in a competitive bidding process aimed at securing a valuation of up to £1.5bn for the mid-tier accountant.

Carlyle, Blackstone, Permira, CVC Capital Partners and Bridgepoint are among buyout firms weighing potential offers for Grant Thornton UK ahead of a deadline in September for formal expressions of interest, according to people familiar with the situation.

London-based Cinven is also seen as a potential bidder by industry executives, while New Mountain Capital, which took a majority stake in Grant Thornton’s US business earlier this year, is exploring an offer as part of a plan to merge the UK, Ireland and US operations, the Financial Times has reported.

The Times published a similar article — headline and all — a week ago.

Just sign it already, then. Or can’t you?

ICYMI: Over the weekend, #53 firm Doeren Mayhew announced they’ve entered into an arrangement with private equity firm Audax. Comments are rolling in and there’s a lively r/accounting discussion here. Anyone inside DM who feels some type of way about this deal is welcome, nay encouraged, to get in touch and talk about it (anonymously). Text the tipline at 202-505-8885 or shoot me an email.

Business Insider says “America’s most boring job is on the brink of extinction.” Oh the AICPA is going to be fuming for a while about that headline.

For most of his youth, Bryan wanted to be an astrophysicist.

He was obsessed with the Hubble telescope, and his bedroom ceiling was dotted with plastic glow-in-the-dark stars. When the Scholastic Book Fair came to his library, he’d beg his parents for cash to buy NASA photo books. To him, space science seemed the pinnacle of innovation, excitement, and existentialism.

So when, as a sophomore in college, he told his parents he was going to major in accounting, they gave him what Bryan (which isn’t his real name) could describe only as “a look.”

“An accountant?” he remembers his mother saying. “Why would you want to be an accountant?”

Certified public accountants have long been cast as penny-pinching list checkers with vanilla personalities and a zeal for taxes, but that stereotype seems to turn off Gen Z more than any previous generation. That perception plus the industry’s actual hurdles and pitfalls have compounded in the past several years to create a nationwide accountant shortage.

Nothing unique here but there’s this:

There are some signs that some firms are responding to calls for salary changes. Margaret Burke, the talent acquisition and development leader at PwC, said in a written statement that the firm has increased entry-level salaries for audit and tax associates “over the last several years,” but declined to say by how much. She also pointed out that PwC gives performance-based raises and bonuses “at all levels.”

Does it beat inflation at least?

Related: Just How Much Have Accounting Salaries Increased in the Last Five Years?

Outsourced staff in the Philippines are getting better amenities:

An accounting outsourcing provider is actively expanding its workforce, seeking to hire more accountants, bookkeepers and other professionals as it launches its second office in Cebu IT Park.

In a statement, TOA Global announced that its new office in the Skyrise 3B Tower covers over 5,000 square meters across five floors and can accommodate 940 employees.

Employees may work in-office, fully remote or on a flexible arrangement.

For a better in-office experience, the company said it invested in various amenities to support the team’s productivity, learning and well-being. These include an open-plan production area with natural light, training rooms, chillout rooms, a clinic, massage chairs, table tennis and billiards equipment and a karaoke or KTV room.

Regulators are “hitting auditors hard,” says CFO.com in this report of a report:

Horne got data breached:

On August 20, 2024, nationwide accounting firm Horne, LLP filed a notice of data breach with the Attorney General of Massachusetts. In this notice, Horne explains that the incident resulted in an unauthorized party being able to access consumers’ sensitive information. Upon completing its investigation, Horne began sending out data breach notification letters to all individuals whose information was affected by the recent data security incident.

The Horne data breach was only recently announced, and more information is expected in the near future. However, Horne’s filing with the Attorney General of Massachusetts provides some important information on what led up to the breach. According to this source, in December 2021, Horne detected suspicious activity within portions of its computer network. In response, Horne secured its network and then launched an investigation to determine what happened and what, if any, consumer information may have been compromised as a result.

Through this investigation, Horne learned that an unauthorized party had gained access to portions of its IT network between December 8, 2021, and December 13, 2021. While the investigation was able to confirm that certain systems were accessed, Horne was not able to confirm what information within those systems was actually accessed. Thus, Horne conducted a detailed review of the information contained within the compromised portions of its network. Horne recently completed this review.

JD Supra said publicly available data breach letters don’t mention what exactly may have been breached but individual letters sent out to potentially affected persons do.

CPA Ontario got around to punishing BF Borgers. Poor Ben F Vonesh.

CPA Ontario, the regulatory body responsible for the licensing and oversight of Chartered Professional Accountants and accounting firms in Ontario, has prosecuted BF Borgers CPA PC and Ben Borgers, of Lakewood, Colorado, for offences under the Chartered Professional Accountants of Ontario Act, 2017, and the Public Accounting Act, 2004.

Borgers and the Firm pleaded guilty to engaging in public accounting work in Ontario, including performing the audit of a reporting issuer, without registering with CPA Ontario or holding a Public Accounting License in Ontario.

“We continue to take action against accounting firms and CPAs who fail to comply with our requirements to practice in the province, in accordance with our mandate to protect the public and uphold the high standards of the CPA profession,” said Janet Gillies, CPA, CA, executive vice-president, Regulatory and Standards, CPA Ontario. “Unregistered and unlicensed firms and CPAs operating in Ontario bypass essential regulatory oversight, undermining public protection and confidence in public accounting.”

Bloomberg Tax reported a couple days ago that Ben Borgers is probably going to lose his Colorado CPA license.

Earlier: The SEC Just Charged Trump Media’s Spelling-Challenged Auditor with “Massive Fraud”

Business Insider published an as-told-to essay: I was fired from Deloitte after 18 months. Here are the mistakes I made as a new grad.

I wasn’t a great student in high school — I had a 2.4 GPA. Even my guidance counselor told me that community college would probably be my best option.

Yet I managed to land a job at Deloitte after college. Eighteen months later, though, I was fired.

He barely got the opportunity to get fired.

Throughout college, I tried hard to make money — I resold my classmates used textbooks and worked multiple part-time retail and service jobs.

I knew other people who got internships, but I didn’t manage to land any despite going to many Meet the Firms events, attending presentations, doing mock interviews, and submitting applications.

I remember thinking I crushed my first Meet the Firms event since I’d met many people and had gotten a stack of business cards. I was excited to follow up. Then my professor, the head of accounting, pulled me aside and told me that one of the Big Four firm’s employees had mentioned that I needed to clean up, shave my beard, and be more presentable.

At another event, I remember one of the Big Four recruiters telling me, “I’m not even going to take a look at your résumé because your GPA isn’t high enough.”

Worth a read maybe. TLDR He missed deadlines, told his senior manager he was going through some shit and she said “Hey, I know you’re going through a lot, but everybody goes through stuff in their life, but they all end up figuring out how to get things done on time.” LOL

I think that’s enough for now. Not hearing a whole lot of buzz at the moment which hopefully means you all are enjoying what’s left of your summer. Whispers of a beloved top 20 firm shopping itself out to private equity are getting louder, stg if this firm gets in bed with private equity I will give up all hope on the future of this profession. Not naming names but iykyk. If you hear anything let us know.

Comments are off on the Monday Morning Accounting News Brief by default but you may email, text, or catch us on Twitter if you have anything to say about the stories here or elsewhere.

Have a wonderful week and be well.

The post Monday Morning Accounting News Brief: Outsourced Office Gets Karaoke, ‘Chillout Rooms’; 2.4 GPA Guy Couldn’t Hack It in Big 4 appeared first on Going Concern.

Big News

Tax Firm Carrying On Arthur Andersen Brand Explores IPO [Wall Street Journal]
Do you know what’s really annoying? We were going to run this as a rumor story last week. People have been gossiping about it for weeks.
Andersen Global, the tax and legal services firm that emerged from the remnants of the defunct accounting giant rocked by the Enron scandal, is exploring taking its U.S. business public. The San Francisco-based firm is advancing efforts to pursue an initial public offering of the U.S. unit, Andersen, with the support of nearly all of its U.S. partners, according to internal memos reviewed by The Wall Street Journal. Ninety-nine percent of 264 participating U.S. partners voted in favor of continuing to consider an IPO earlier this month, an email showed. The U.S. unit, which offers tax, valuation and financial-advisory services, had more than 280 U.S. partners as of the start of the year. “This will enable me to advance discussions for key positions and put us in a place where we can pull the trigger when we are ready,” Andersen Chief Executive Mark Vorsatz said in a July 31 email to partners before the vote, referring to the hiring of executives and other personnel.

EY Sheds U.S. Audit Clients in Response to Shortfalls [Wall Street Journal]
Ernst & Young said it is cutting ties with many U.S. public companies as audit clients, a move to revamp its audit practice and improve the quality of its work. Eighty-four public companies exited EY as audit clients between Jan. 1, 2023, and Aug. 15 of this year, according to data from research firm Ideagen Audit Analytics. The firm also added 21 clients in that time. That is at least 50 departures more than at the other three large accounting firms—Deloitte, KPMG and PricewaterhouseCoopers—during the same period. In contrast with EY’s net loss of 63 clients, Deloitte, KPMG and PwC had net arrivals of 46, 13 and four, respectively, in that period. The reduced roster and loss of roughly $215 million in fees could threaten EY’s status as the largest auditor of U.S. public companies by market share, but that isn’t something the firm is worried about yet. The reduction is largely by design and is intended to “accelerate our transformation efforts,” said Dante D’Egidio, the firm’s Americas vice chair for assurance.

Audit

Founder of Trump Media’s Ex-Auditor Faces CPA License Loss [Bloomberg Tax]
The founder of an audit firm that was branded as a “massive fraud” by the SEC risks losing his certified public accounting license, a punishment that would prevent his firm, BF Borgers CPA PC, from performing external audits or certain complex tax returns. Colorado accounting regulators on Wednesday voted to refer the firm and its founder, Benjamin Borgers, to the state’s attorney general for CPA revocation, a spokesperson for the state’s Department of Regulatory Agencies said. Borgers may also voluntarily surrender his license, the board said.

Earlier:

SEC approves tougher rules targeting auditor ‘negligence’ [CFO Dive]
The new standard drew “no” votes from two of the five SEC commissioners, both Republicans. “This change is neither consistent with the requirements of the securities laws nor necessary or appropriate in the public interest or for the protection of investors,” Commissioner Hester Peirce said in a statement before the vote. The update “could have the unintended consequence of lowering audit quality and could worsen the trend toward fewer talented individuals entering the audit profession,” she said.

Prepping for the internal audit, CFO ‘inflection’ point [CFO Dive] Faced with a complex regulatory environment, new technologies, cybersecurity challenges, and an ongoing shortage of talent, today’s internal audit leaders are as swamped as any CFO. Much like the finance chief, today’s internal auditors have also seen their traditional roles morph away from just crunching numbers to being asked a key question: “What’s coming next?” said Andrew Struthers-Kennedy, global leader of Protiviti’s internal audit and financial advisory practice.

International

PH seen struggling with shortage of accountants [Philippine Daily Inquirer]
We were unable to find a verified reputable source to this so take it with a grain of salt. We do know the Philippines is approaching an accountant shortage of some kind, for now it mainly affects their own firms and businessness, not the American, British, and Australian accounting firms that are using this talent.
The Philippines is experiencing a shortage in accountants, a predicament that will likely worsen given the declining number of students taking accounting-related courses coupled with other emerging trends that seem to be taking a chunk out of the talent pool of traditional accounting firms. Marvin Galang, co-founder of financial mobile app built for freelancers called Beppo, said on Friday that they found alarming the results of a survey showing that there is a 41-percent decline in student enrolment in local accounting programs. “Subsequently, we also saw a decline of 35 percent in the number of [certified public accountant] examinees from 2019 to 2023,” Galang said during a conference focused on the local accounting industry.

Kelly Partners furthers its US exposure with new partnership [Accounting Times]
Kelly Partners Group (KPG) and FRSCPA, a Florida based company, announced the beginning of their partnership through executed agreements, based on a purchase price of AUD$7.6 million. FRSCPA is a public accounting firm “committed to providing its clients with high quality, professional accounting, tax and consulting services in a manner that incorporates sound professional business and personal ethics”. A wholly owned subsidiary of KPG will acquire 50.1 per cent of the business, with the remaining 49.9 per cent held by all four existing equity partners of the business under KPG’s partner-owner driver model.

Talent

Is your firm looking to hire accountants or auditors to fill remote roles? Check out this week’s top candidates from Accountingfly. Here’s a sample of a great candidate ready to start as soon as you are:

FTE Tax and Accounting Senior | Candidate ID #22105553

• Certifications: EA
• Education: BS Accounting, BS Finance
• Experience (years): 15+ years accounting and tax experience
• Work experience (detail): 12+ years with one public firm
  • Led a tax team of 5+ tax associates
  • Federal, SALT and payroll tax preparation and review
  • Full cycle accounting services
• Client niches: SMBs, Healthcare, Medical Practices, Publishing, Nonprofits
• Tech Stack: QB/QBO, Accounting CS, UltraTax, TaxWise, SurePrep, Onvio, Avalara
• Remote Work Experience: Y
• Salary: $90k, flexible
• Time Zone: Central
• Sign up to learn about this Candidate

Firm Watch

MHM Changes Name to CBIZ CPAs P.C. [Mayer Hoffman McCann] Mayer Hoffman McCann P.C. (MHM), based in Kansas City, Mo., announced today that it is changing its name to CBIZ CPAs P.C., effective immediately. CBIZ CPAs P.C. (CBIZ CPAs) is an independent CPA firm with 35 offices nationwide that provides audit, review and attest services, and works closely with CBIZ, a leading national provider of financial, insurance and advisory services, but is a separate legal entity.

Private Equity

The rise of private equity in accounting: Not just for large firms anymore [Thomson Reuters] Private equity (PE) firms typically invest in businesses with the goal of enhancing the value of the business (and thus the investment of the PE firm) over a period of time before exiting through a sale or public offering. Historically, PE investment was concentrated in certain select industries such as technology, healthcare, and manufacturing. Over the past decade, however, there has been a marked increase in PE interest in professional services, including tax & accounting firms. In fact, August 2021 is seen as the landmark year of PE firms’ splash into the accounting sector with the announcement by TowerBrook Capital Partners that it was investing in EisnerAmper, a 3,000-employee global tax & accounting firm. In less than three years, PE firms have bought stakes in five of the top 26 accounting firms, and this trend is predicted to continue, which can be attributed to a few key factors.

Big 4

Deloitte: Enterprises Face Gen AI Scaling Challenges [Technology Magazine]
The survey, based on responses from 2,770 director to C-suite level executives across 14 countries, shows that while organisations are committing more resources to Gen AI, they are struggling with scaling and demonstrating value. The report, The State of Generative AI in the Enterprise: Now Decides Next, finds that 67% of respondents are increasing their Gen AI investments due to perceived value. However, this commitment is offset by obstacles including data quality issues, investment costs and regulatory uncertainties. Jim Rowan, Applied AI leader at Deloitte Consulting LLP, states: “We have arrived at a pivotal moment for Generative AI, balancing leaders’ high expectations with challenges such as data quality, investment costs, effective measurement and an evolving regulatory landscape.”

Deloitte Legal Research Platform ‘Moonlit’ Spins Out [Artificial Lawyer]
Amsterdam-based Moonlit, a genAI legal research platform, has spun out of Big Four firm Deloitte to go its own way and compete in the legal data market with a focus on the EU. Dirk-Jan van den Broek, Co-Founder of the now independent Moonlit, who is a class action lawyer and also the founder of another legal tech company, ClaimShare, told Artificial Lawyer the business had spun out because ‘case law and legislation research and analysis are not a core business for Deloitte and Moonlit will thrive better as an independent tool’. They have also received fresh investment, including from Curiosity VC. Van den Broek told this site he could not reveal the amount, but added that ‘we can disclose that Deloitte is a launch partner and supporter of the platform’.

PwC loses major client Bank of China amid regulatory probe [Reuters]
Auditor PwC has lost its largest mainland China-listed client, Bank of China, to rival EY, adding to an exodus of clientele amid a regulatory investigation into its work on troubled property developer China Evergrande Group. State-owned Bank of China had as recently as March stated plans to reappoint PwC as its auditor for 2024 but in a filing late on Monday said it plans to appoint EY. The decision will be submitted for shareholder approval, it said. PwC, once the leading auditing firm in China, declined to comment.

KPMG’s Andrew Yates in his bonus era [Financial Review]
In quieter moments, you reckon this country’s big four consultants and accountants rue the day they first learned the name Peter Collins? PwC’s tax-leaking wrecking ball swung into his firm, but it’s the second-order damage that means things will never be quite the same in the professional services game. Take the recent necessary and embarrassing public discourse about the take-home pay of its top strivers. Particularly those exposed to advising government and lining their pockets with taxpayer dollars. Some are doing better than others in opening the kimono. This month, KPMG put out its 2024 Impact Plan. It’s one for the true-believers, running to some 76 pages, full of wise-sounding jargon and vague ambition. But on page 22, the firm proudly announces it’s the “first Australian Big 4 partnership” to promise to publish executive pay every year. It’s anonymised and in bands, but baby steps. Good for KPMG. That’s except the chief executive’s pay. KPMG’s report shows Andrew Yates took home $2.47 million in FY23 and $2.44m in FY24.

Tax

The reality of Kamala Harris’ plan to tax unrealized capital gains [Axios]
Silicon Valley was burning up the socials this week, after learning that Kamala Harris has tacitly endorsed a tax on unrealized capital gains. Lots of what was shared was inaccurate. Reality check: This only would impact a small subset of America’s wealthiest people, and most tech founders and investors would be spared. What to know: Harris didn’t release a new tax plan. Instead, her campaign said it agrees with a series of items in President Biden’s last budget proposal, the most relevant of which were nonstarters in Congress and didn’t become law. This includes the new tax on unrealized capital gains.

There Is No Kamala Harris Golf Tax—But Maybe There Should Be One [Forbes]
There has been much made on social media in the last twenty-four hours of a supposed proposal by the Harris administration for a 20% excise tax on all things related to golf. As with so many things on the internet, it appears to have no basis in fact and originates from a parody account on Twitter/X. However, golf courses carry with them myriad externalities, the cost of which are born by society writ large: from environmental impacts like water consumption, chemical fertilizer runoff, habitat disruption and soil degradation to waste generation and the taking up of valuable real estate. While the Harris administration may have no plans to implement a golf tax—it may not be a bad idea.

Google Gets Tax Deduction for Most of California Journalism Deal [Bloomberg Tax]
Most of the $242.5 million Google agreed to spend on journalism initiatives and artificial intelligence in California to avoid possible taxes or fees will be tax deductible. Alphabet Inc.’s Google committed to spend that much over five years to boost journalism in California under an agreement reached this week with Assemblymember Buffy Wicks (D). Of that, $130 million is meant for a journalism fund hosted by the University of California, Berkeley Graduate School of Journalism.

No tax on tips fires up Nevada hospitality workers: ‘I want that!’ [The Guardian]
Kristine serves gamblers playing countertop video poker screens at the center bar of Las Vegas’s Ellis Island casino. She declines to share her last name for privacy reasons, but is not timid about her support for Donald Trump when asked about his campaign promise to end federal taxation on tips. “I want that!” Kristine says as she fulfills cocktail waitresses’ orders. “Our tip compliance is too high. They take so much from our paycheck.” Tip compliance – the tax process for expected earnings from tips – has become a political football in Nevada, with federal lawmakers from both parties piling in to co-sponsor bills or present their vision for how tax exemption for tips should work.

Owner of North Carolina High Performance Car Business Pleads Guilty to Employment Tax Crime [Department of Justice]
North Carolina businessman George William Taylor Jr. of Wilmington pled guilty today to not paying more than $2 million in employment taxes and not filing employment tax returns. According to court documents and statements made in court, Taylor, owned and operated National Speed, a high-performance automotive services business. As the chairman and president of National Speed, Taylor was responsible for withholding Social Security, Medicare, and income taxes from employees’ wages and paying those taxes to the IRS. From 2014 through 2021, Taylor withheld the taxes, but did not pay those withholdings over to the IRS, nor did he file the necessary employment tax returns. During the same period, he also did not pay the employer’s share of those taxes to the IRS. In total, Taylor caused a tax loss to the IRS of $2,272,072.

Phil Liberatore, CPA and IRS Advocate, Reports IRS Shortcomings in Addressing Identity Theft and Backlogs [EIN Presswire]
Phil Liberatore, CPA and IRS advocate, says the Internal Revenue Service (IRS) is failing to assist victims of identity theft with receiving their tax refunds. This is according to a new report from National Taxpayer Advocate Erin Collins. The midyear report, released recently, also highlights concerns over misleading statistics regarding the IRS’s phone call response rates. “The delays in resolving identity theft cases are unacceptable,” said Liberatore. “Taxpayers who are victims of identity theft are already going through a stressful experience. To then have to wait nearly two years for resolution adds unnecessary hardship. The IRS needs to prioritize these cases to restore trust in the system.”

Municipal Messes

Mayor Frank Brocato gives perplexing audit update [Alabama Today]
For months, the City of Hoover has attempted to hide the details of its ongoing forensic audit while evading questions about its annual audit. At the August 05, 2024 city council meeting, Mayor Frank Brocato read a statement about the status of the two audits. The forensic audit was first reported only after it came up during an unrelated hearing. On the one hand, the mayor sought to downplay the need for the forensic audit, saying that under his watch, the city has “consistently received clean audit opinions.” On the other hand, the mayor stressed that there were concerns so worthwhile that the city brought in the additional accounting firm and that the current CFO, Jennifer Cornett, and her team continue to address the problems. The Mayor explained, “several of them have already been addressed. Mrs. Cornett and her staff are working long hours to correct the others.”

The post Friday Footnotes: EY Shrinks Its Audit Practice; Andersen Going Public; Someone’s Losing a CPA License | 8.23.24 appeared first on Going Concern.

Partner profits at KPMG Australia are down but use of bots to replace human work is up, reports Australian Financial Review:

Lower demand for “legacy” consulting services has pushed revenue at KPMG down 3.6 per cent, sending partner profits lower by an average of 9 per cent.

The firm also revealed mundane work previously performed by humans, such as reviewing regulatory documentation and creating training materials, was now the partial responsibility of bots. In fact, KPMG has put in place 20 of a planned 125 “digital FTEs” – or full-time equivalents – the firm said.

The firm’s 2023-24 revenue was $2.2 billion and average partner income was down to $650,000. That compares with an average partner income of about $814,000 at EY and between $430,000 and $516,000 at Deloitte.

BREAKING NEWS! Young accountants are at risk of ‘burnout’:

Resilience in young workers is relatively low and on a steady decline, which is directly contributing to the decrease in young individuals entering the professional services industry, according to research and resilience training provider Springfox.

Springfox CEO and co-founder Peta Sigley said young workers are more prone to burnout due to workplace expectations and overwhelm.

“When junior accountants kickstart their careers they often have to grapple with high expectations and pressures to succeed which can lead them to set lofty goals and take on more work than they can handle,” she said.

“This drive, while admirable, can soon leave them feeling overwhelmed and out of control.”

Ah yes, it’s their drive that causes burnout and not the firms themselves piling on more work.

Did the SEC censor an academic paper produced by one of its fellows because it didn’t like the optics? That’s the accusation covered in this FT article:

The US Securities and Exchange Commission has been accused of censorship after forcing an academic to delay publication of a paper examining the impact of regulation on small audit firms for nine months.

The politically sensitive paper, based on three years of interviews with audit firm staff, was completed by Ally Zimmerman and three other researchers while Zimmerman was in a one-year fellowship at the SEC last year. Zimmerman, an associate professor at Florida State University, finished the fellowship in July.

The paper highlights criticism of the Public Company Accounting Oversight Board, the US audit regulator that is overseen by the SEC. Small firms complained of delays in getting feedback from the agency, the paper found, indicating the regulator’s inspection regime favoured larger firms such as the Big Four. Smaller auditors did not have the same infrastructure to respond when inspectors found audit flaws, the researchers said.

The work had only now been made public after the end of her fellowship, Zimmerman told the Financial Times, and the authors plan to submit it for peer review. “The SEC didn’t like the paper being out there,” she said, adding that one SEC staffer told her during her fellowship that there was a problem with “optics”.

Streisand Effect lol

@AKofth6 on Xitter asked us to comment on this, maybe you should instead.

I learned so much sat in the audit team room in my first few years.

Chatting issues through. Hearing my senior colleagues on the phone. Sharing ideas. Trying to make myself a bit better than the person next to me.

If audit rooms are dying off due to more remote work, that has…

— The Secret CFO (@SecretCFO) August 19, 2024

@SecretCFO thread here.

Regular Going Concern readers will know we have been keeping an eye on various municipal bush fires burning throughout the country, most of which are directly related to the talent shortage. Here’s another one. Though it sounds like the situation in Pawhuska, Oklahoma is one guy, not an understaffed CPA firm:

Pawhuska city officials voiced frustration during an Aug. 13 City Council meeting about the ongoing wait for delivery to them of an audit report for the 2022-2023 fiscal year.

The city engaged the firm of David Clanin, a CPA based in Vinita, to perform the 2022-2023 audit for $12,000. The engagement letter said that the firm anticipated starting work approximately in July of 2023 and issuing a report no later than Dec. 31, 2023, Jones explained.

“He (Clanin) did not provide a new timeline,” Jones told the Council on Aug. 13. She said that she had reached other providers of audit services.

Private equity firms are “circling” the King’s Grant Thornton. Like vultures?

Private equity giants are circling Grant Thornton with a view to lodging bids for Britain’s sixth-largest accountant, which could kick off a formal sale process as soon as next month.

CVC, the European owner of the La Liga football league, is running the rule over the UK arm of Grant Thornton, which employs about 5,500 people, in the hopes of lodging a bid.

KKR has also taken a look at bidding for the accountancy in recent weeks, although people close to the situation said that it was unclear whether the US buyout behemoth was currently interested.

Sources are telling The Times that Grant Thornton has been approaching private equity firms directly and that a formal process will begin soon. We’ve heard that before…

Closer to home, Grant Thornton US published “Our commitment to audit quality” on August 15. We assume this was prompted by a deficiency rate of more than 50% in its most recent round of PCAOB inspections:

For nearly 100 years, Grant Thornton has been providing exceptional audit and assurance services to the domestic and global marketplace. We operate with quality as our North Star and our foundation, regularly identifying and addressing challenges, while always building on our capabilities.

Today, for example, we’re leaning into technology and innovation. Advanced technologies such as artificial intelligence (AI) are helping us conduct more effective audits and empower our people to deliver on every engagement with high quality. Already, we’re creating AI systems to analyze and identify areas of audits that have historically required added scrutiny, while also using AI to monitor cloud-based audits. And we’re using AI for ICFR (internal control over financial reporting) engagements.

We’re also reinventing the way we train and upskill our people — from how and who we hire to how we train and coach our teams. And we’re implementing new policy and process updates, and heightening quality controls.

At the same time, we’re standardizing work papers to drive consistency, and we’re deploying a new pre-issuance review team that executes inspections on public company audit files prior to issuing audit reports. Similarly, we’re utilizing an audit quality pod system designed to drive actions that continuously improve audit quality.

Yeah, we don’t need to read the rest of that. Show, don’t tell.

Bberg’s Talking Tax podcast goes inside EY’s generative AI rollout:

The Big Four company is investing $1.4 billion into gen AI globally. Other Big Four firms have made similar pledges. The investments are in part a bet that the technology can fill in some gaps from the longstanding accounting shortage.

But implementing the technology in tax departments is difficult, in part because of how often policies change and the vast amount of data. Daren Campbell, leader of EY Americas Tax Technology and Transformation team, gave Bloomberg Tax an inside look at how his team seeks to overcome these challenges, where the technology is today, and what’s next.

The podcast module annoyingly can’t be embedded so you’ll have to click that link above to listen.

And in “Oh God, Another Big 4 Lawsuit!?” news, PwC snagged one from a former client:

A UK property developer is suing PwC in London’s High Court, alleging that the Big Four accountancy firm provided “negligent” tax advice that landed the company with a £3mn bill to Britain’s tax authority.

Revelan, a commercial property developer formerly backed by US investment manager Ares, is seeking about £6.6mn for loss and damages after claiming that the consulting firm “failed to accurately calculate tax due” by the group over a five-year period, according to court documents obtained by the Financial Times.

The errors, some of which PwC admitted in a letter to HM Revenue & Customs, left Revelan with a bill totalling about £3mn to the tax authority, comprising outstanding tax liabilities, unpaid interest and penalties for late payment, the documents show.

£3 million = about $3.9 million USD.

I haven’t had my sugar-free Red Bull yet so that will have to do for now. We’ve got a busy week of PCAOB inspection reports to get through this week and a surprise story about BDO that will give us a look into their current financial state. If you see anything else we should be talking about, please email or text 202-505-8885 and we’d be happy to take a look.

Have a great week, you!

The post Monday Morning Accounting News Brief: KPMG Partners Take a Hit; Grant Thornton Commits to Audit Quality After Blowing It | 8.19.24 appeared first on Going Concern.

Talent

The future of audit talent [Thomson Reuters]
The landscape for audit talent is shifting significantly. Projections indicate a growth in employment opportunities for accountants and auditors, while roles focused on bookkeeping and data entry are expected to decline. This shift is largely due to the integration of AI and automation technologies, which streamline routine tasks and open up opportunities for auditors to engage in higher-value work. This transformation in the job market demands a workforce that is adept at leveraging technology for more complex and strategic tasks.

To Recruit More CPAs, Show Them What’s Possible [FEI]
Auditor, chief financial officer, data scientist, regulator, entrepreneur. Those are some of the many careers available to a certified public accountant (CPA). Unfortunately, however, interest in the accounting profession is waning. And with the stability of capital markets and the business world overall dependent on a thriving profession, the time to act is now. We need to come together as public accounting firms, public and private companies, industry associations and CPA societies to sell a career in accounting differently. We need to create greater awareness for the work of a CPA and the impact it has. And that starts with storytelling.

Audit

BDO sinks to bottom of US audit quality league table [Financial Times]
There are still “unacceptable” numbers of flaws in the work carried out by the largest US audit firms, the industry’s regulator said on Thursday, after its inspections showed a surging rate of deficiencies at mid-tier firms BDO and Grant Thornton in particular. At BDO, 86 per cent of audits inspected by the PCAOB were found to be deficient, meaning that the firm had failed to collect enough evidence to support at least part of its audit conclusion. At Grant Thornton, a little over half of audits inspected contained flaws.

Big Four Audit Shortfalls Stabilize, Latest Inspections Show [Wall Street Journal]
PricewaterhouseCoopers and Deloitte experienced greater deficiencies in their audits of public companies’ 2022 financial statements compared with the previous year, while the overall rate of Big Four accounting firms’ shortcomings stabilized, according to the latest annual inspection reports. The Public Company Accounting Oversight Board last year inspected 230 audits conducted by the Big Four firms in the U.S.—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers—up from 215 a year earlier. The firms collectively had an average deficiency rate of about 26%, the same as a year earlier. PCAOB Chair Erica Williams said the findings from the inspections released Thursday, which covered audits of 2022 financials, were still unacceptable. The Big Four averaged a rate of 20% over the previous five years, reports show.

PwC fined £15m for failing to report suspected fraud at City firm [The Guardian]
The UK financial services watchdog has fined PwC a record £15m after audit staff failed to tell regulators they suspected fraud at a City firm that collapsed in 2019, leaving more than 11,000 investors almost £240m out of pocket. It marks the first Financial Conduct Authority (FCA) fine against an auditor, and comes three months after PwC was hit with a £4.9m separate penalty by the Financial Reporting Council over the handling of London Capital & Finance’s accounts. LC&F collapsed after taking about £237m from 11,600 investors. Its mini-bonds promised stellar returns of up to 8% a year, but put only a small amount of cash into safe interest-bearing investments. The rest was funnelled into speculative property developments, oil exploration in Faroe Islands and even a helicopter bought for a company controlled by LC&F. The collapse in January 2019 led to reprimands for the FCA and a criminal investigation by the Serious Fraud Office, which is still open. The latest fine, the largest ever imposed on PwC in the UK, draws a line under the FCA’s investigation into the affair.

AI in Accounting

Navigating AI challenges for tax research [Thomson Reuters]
While the future of AI in tax research is certainly promising, it’s important to understand the benefits and challenges to successfully harness the power of AI for a competitive edge. This blog delves into the concerns associated with AI adoption in professional settings and offers strategies to mitigate them, ensuring a smooth transition into an AI-powered future.

International Happenings

Consultants allegedly advising on avoiding Labour tax clampdown [Consultancy.uk]
We shared the original Guardian article about this but Consultancy.uk just got around to writing it up so ICYMI…
Stuart Clifford, a principal at Baker Tilly Isle of Man, said to an undercover reporter at the event, “My last one I did of these – £30 million… [The client] said … ‘That’s my kids’ money. So let’s protect it from IHT today.’ [The] day he got it – £30 million [went] into [the offshore product]. He’s not doing anything funky. He’s not paying a lot for it, that’s just going through investment managers and what have you.”

Deloitte’s Adrian Mills and Matt Lawson go independent [AdNews]
Deloitte Digital down under is changing things up and these two dudes are outta there.
Admen Adrian Mills and Matt Lawson will establish an independent agency and formally separate from Deloitte Digital from mid September. The agency will be called ATime&Place and will deliver advertising work for top tier brands, including Deloitte. Deloitte Digital is re-balancing its offering portfolio to focus on customer and brand strategy, integrated customer experience design, marketing technology implementation and marketing, sales and service transformation. Adrian Mills and Matt Lawson joined Deloitte Digital in 2017 from McCann and went on to establish creative, brand and advertising services.

EY, KPMG benefit most from PwC China’s regulatory woes [Reuters]
Ernst & Young (EY) and KPMG have snapped up over half of PwC’s corporate clients in China that have fled the market’s leading accounting firm as it faces a regulatory probe, filings show. Chinese authorities have been investigating PwC’s role in auditing China Evergrande Group after the securities regulator accused the troubled property developer in March of a $78-billion fraud. PwC audited Evergrande for almost 14 years until early 2023. Regulators have also asked several large state-owned clients of PwC to drop the auditor since at least April. “Compared to previous years, what we’re seeing this year is certainly an unusual client exodus from PwC,” said Fan Zhongwen, an accounting professor at City University of Hong Kong.

News

Deloitte replaces Atos as Olympics lead tech integrator for LA 2028 [SportsPro]
Now, starting with Milan Cortina 2026, Deloitte will be responsible for managing the entire Olympic IT operation, managing equipment and resources from multiple tech vendors at the Technology Operations Centre (TOC). It will design, build, implement, operate and secure the IT infrastructure, key applications, and cybersecurity provisions, building technologies that can be reused and adapted to the needs of individual Olympic and Paralympic Games. Everything from accreditation and scheduling through to results and team management software will come under its expanded remit.

CPA firm says city’s audit not ready to present [Natchez Democrat]
More muni mess.
The Natchez Mayor and Board of Aldermen expected to hear results from its FY 2023 audit, but that didn’t happen. Carr Hammond, CPA and managing partner at Silas Simmons, the accounting firm the city contracts with for its audits, was not available to attend Tuesday’s board meeting, but sent word to Mayor Dan Gibson that the audit was not ready to present. “We will not be satisfied with any audits late in this administration again and that has been made aware to all parties involved,” Gibson said.

The post Friday Footnotes: BDO Blows It; PwC Blazes a Trail in New Audit Fines; Using AI For Tax Research | 8.16.24 appeared first on Going Concern.

Computerworld interviewed Ken Englund, Technology Sector Growth Leader at EY Americas.

Headline: EY exec: In three or four years, ‘we won’t even talk about AI’

Why do you think this has been one of the most unique hiring periods over the past decade or so, and how has AI affected that lately? “I do fundamentally think we’ve had a platform shift. We had this around mobile. We had this around e-commerce. Or, if you go back far enough, we had this shift from mainframes to client-servers. So, I do believe this [AI] is a fundamentally a platform shift.

“From that perspective, the most critical thing when I sit down with clients, I always ask them, ‘How’s your data doing?’ We all know nobody has perfect data. In the AI world, data is going to become even more important. If it was difficult to manage your data before — think about graph databases and vector databases — really we see a lot of investment by enterprises into getting their data right for AI; that translates into ensuring you have the right resources: data architects, analysts, AI engineers and all those sort of positions as driving it.”

Meet Ariela Ortiz, Binghamton University School of Management graduate (2007) and one of those weird people who really enjoys running.

Her alma mater wrote up a nice little thing about how she’s completed six major world marathons:

When she’s not completing company reports and releases, Ariela Ortiz ’07 prepares for some of the most famous races in the world.

It’s like a natural instinct for her to train for hours at a time — every morning, rain or shine. After those long runs, she gets ready for a daily commute to her conventional 9-to-5 at KKR, an asset management firm based in New York City.

If you expected from the above paragraph that this get-up-and-go-er did time at Big 4 you would be correct.

During her sophomore year, Ortiz co-founded the Alpha Chapter of the Association of Latino Professionals in Finance and Accounting (ALPFA).

Through ALPFA, Ortiz networked with professionals from the Big Four accounting firms — Deloitte, EY, KPMG and PwC — which gave her a crucial “kickstart.” By her junior year, Ortiz connected with a recruiter who secured her a two-year internship at Deloitte.

Ortiz spent years there auditing and studying for her CPA exam. After successfully passing and gaining licensure as an accountant, her schedule opened up.

That’s when a friend suggested they start running together — a sport Ortiz hadn’t participated in since joining her high school track team. Ortiz signed up for the New York City Marathon in 2014.

The rest is history.

We salute you, Ariela. Couldn’t be me, I’m about that bike life.

PwC is hooking up with a cockroach. Sorry, PwC is hooking up with Cockroach Labs. I’d prefer actual cockroaches to being forced to read this press release again.

With this partnership, PwC UK and Cockroach Labs will offer end-to-end comprehensive solutions to banks and financial service institutions grappling with evolving regulatory complexities and impending mandates around operational resiliency, business continuity, and data sovereignty. Additionally, they will address the growing need for financial firms to migrate from legacy mainframes in alignment with modern customer expectations and industry-wide cost optimization initiatives.

Marcum Asia was apparently orphaned in the Marcum/CBIZ deal announced two weeks ago.

Marcum Asia, the US audit firm focused on Chinese small-caps, has been excluded from the $2.3bn acquisition of its parent company, leaving it searching for a new name and potentially new investors.

“We understand that the Asia focus of Marcum Asia’s practice was not part of CBiz’s strategy,” said Drew Bernstein, co-chair of Marcum Asia.

The firm, which has annual revenues of about $50mn, would keep the right to use the Marcum brand for an unspecified transition period after the CBiz deal closes, Bernstein said, and it would not need to untangle its staffing and quality assurance processes from Marcum’s until after that period.

It’s all very complicated, go check out FT for the full story.

Some gambling drama down under involving Deloitte:

Deloitte allegedly signed off on “materially understated” gambling fees owed by William Hill Australia and failed to disclose three years of underpayments at the bookmaker when it was engaged to help BetEasy acquire the company, according to new claims.

BetEasy, now part of London-listed Flutter Entertainment’s Sportsbet business, acquired William Hill for $313.7 million in 2018. As part of the deal, it appointed Deloitte to run the rule over the business.

Sportsbet and its insurer, Allied World, have accused Deloitte of negligence during that process, and its audit work for William Hill before that. It has alleged, in documents filed with the Supreme Court in NSW, that the firm signed off on “materially understated” fees that William Hill was required to pay to Racing Victoria between 2015 and 2018.

390 current and former partners are also named in the claim.

The Institute of Public Accountants of Australia is annoyed that all tax practitioners are getting lumped in with naughty PwC. Here comes the strongly worded letter!

The Institute of Public Accountants has criticised the government’s reference to the PwC incident in the various sets of reform measures it has released in a recent submission.

The professional body noted that the government’s recent consultation on the eligibility requirements for tax practitioners again refers to regulatory gaps “exposed as a result of the PwC scandal”.

“The direct linkage of these measures to the progress of ‘Government’s comprehensive response to the PwC tax leaks scandal’ is inappropriate as there have not been any systemic failures of standards in the broader tax practitioner community,” said IPA general manager, technical policy, Tony Greco.

“We should not be bundled with revelations of professional misconduct by a small number of large firms which is tainting perceptions that these issues are widespread.”

And on that topic, PwC is annoyed PwC is lumped in with PwC, too. Australian Financial Review continues a deep dive into the scandal and its aftermath:

The PwC players, the blowback and why it could all happen again

Almost 18 months after the tax leaks matter first broke, PwC Australia is still unable to break free of the scandal. The reason is cultural. Despite the apologies, the promises of change, and the introduction of onerous new processes, rules and oversight, the firm’s operatives will, by its very nature as a sales-driven partnership, continue to struggle to balance purpose and profit.

There are multiple signs of this struggle. Many current and former PwC partners challenge the idea that the tax leaks matter involved any serious wrongdoing. They still argue – despite multiple reports saying the opposite – the scandal was nothing more than the sharing of almost trivial information about impending tax laws that were widely flagged by the government. A “victimless crime” hyped up by “the enemy”, in the words of one former leader.

The IRS is giving a little tax relief to taxpayers in South Carolina, North Carolina, Florida and Georgia who got rocked by Hurricane Debby, KPMG has details.

And here’s something else tax-y from KPMG, a complicated Tax Court situation:

The U.S. Tax Court yesterday held that if a participation interest gives the holder a contractual right to a share of proceeds from the sale of specified securities owned by a partnership, that interest is a capital interest in the partnership, regardless of the holder’s subjective intent to participate in the partnership’s business.

The Tax Court also held that the taxpayer did not meet its burden of proof that there was no reasonable expectation that it would ultimately receive interest on an outstanding loan that it later deducted as uncollectible, and thus that it could stop accruing such interest.

The case is: YA Global Investments, LP v. Commissioner, T.C. Memo 2024-78 (August 8, 2024). Read the Tax Court’s opinion [PDF]

And that’s all she wrote (literally). Please do reach out if you see an interesting story you think we should cover, have a tip, or want to share your views on a current hot topic. You can reach me via email or text anytime and on X/Twitter most of the time. Less of the time you can find me on PSN or Switch but let’s keep work segregated from play OK?

Have a great week! Love ya bye.

The post Monday Morning Accounting News Brief: Tax Practitioners Resent Getting Lumped in with PwC Scandal; Marcum’s Orphan | 8.12.24 appeared first on Going Concern.

Who Cares

We were going to write about this new survey but someone in the comments was complaining about all the accountant shortage articles without any improvements being made to salaries and we kinda agree with them that it’s obnoxious. So here, take this tweet instead.

We propose that from now on, all accountant shortage surveys require respondents to share pay figures for roles they're struggling to fill. Also how much they pay offshore staff. pic.twitter.com/9tqNRXcPua

— Going Concern (@going_concern) August 8, 2024

Salaries

The 2024 Accounting Today Salary Survey [Accounting Today]
They don’t have their usual obnoxious paywall on for this one so you can actually read more than half a paragraph.
Compensation is always a hot topic in accounting, but it’s gotten even hotter these days thanks to the difficulty the profession has in attracting and retaining talent. One of the key contributors to the difficulty, according to recent studies — including an influential report from the National Pipeline Advisory Group — is the fact that entry-level salaries in the field are relatively uncompetitive when compared to those commonly available to business majors, and to those in other professions such as technology or finance. With that in mind, Accounting Today recently conducted its inaugural salary survey to create a snapshot of compensation levels across the country.

Audit

Sac State temporarily removes CapRadio audit as firm makes ‘corrections and clarifications’ [The Sacramento Bee]
Sacramento State on Thursday evening removed from its website an audit into Capital Public Radio’s finances, stating that one of several former board members described as having a “possible conflict of interest” was not a board member at the time of the transaction that was flagged. The university said it would post a corrected version of the audit “as soon as possible.” The university hired accounting firm CliftonLarsonAllen to conduct the independent forensic examination into CapRadio, which is an auxiliary of Sacramento State. That report was released publicly Monday, posted by Sacramento State to the school’s website. The 36-page report was then removed from the webpage.

Exclusive: China asks large state financial institutions to drop auditor PwC, say sources [Reuters]
Chinese regulators have in recent months asked several large state-owned clients of PricewaterhouseCoopers (PwC) to drop the auditor as it braces for penalties over its work for troubled property developer Evergrande, said two sources. The sources said the guidance was one of the main reasons for the client exodus from PwC, putting further pressure on the company that has responded by cutting staff numbers and halving the pay of some senior partners.

Firm Watch

Cherry Bekaert acquires accounting software specialist Kerr Consulting [Consulting.us]
Cherry Bekaert, a national accounting and consulting firm, has acquired Kerr Consulting, a Houston-based provider of accounting software managed services.

Accountancy firm rebrands to “bravely showcase our true identity” [Prolific North]
Sweet, can’t wait to see this powerful redesign! Bet it’s super disruptive and unique and truly speaks to the spirit of this firm.

Wut. Now this would have been brave:

Talent

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Big 4

Netherlands Rejected Meat Tax Based on ‘Biased’ Report, Finds New Investigation [Green Queen]
A government-commissioned report calling a meat tax in the Netherlands “unfeasible” was biased, one-sided, and carried out poorly, according to a new investigation. The Ministry of Agriculture, Nature and Food Quality formulated the assignment to research firm Ernst & Young (EY) in such a way that the outcome was almost certain in advance. It stemmed from a 2020 petition in support of a meat tax, which was signed by more than 50,000 Dutch citizens. They argued that a per kilo levy of €2 for chicken, €4.50 for pork and €5.70 for beef would help curb meat consumption, leading to a reduction in greenhouse gas emissions.

One consulting firm has more Olympians than the others [Financial Review]
EY has more Olympians competing for Australia at Paris 2024 than the other three Big 4 firms.

KPMG U.S. Celebrates Third Annual Nationwide Day of Service, ‘Community Impact Day’ [KPMG]
“Community Impact Day brings our people together and gives us the opportunity as a professional services firm to make the difference by devoting our skills, resources and time to help transform our communities,” said Paul Knopp, Chair and CEO, KPMG LLP. “Our commitment to investing in our communities is ongoing and our extraordinary people are at the heart of this important work.” One way KPMG is continuing to evolve this day of service is by offering skills-based volunteer opportunities centered around the firm’s AI Impact Initiative. This CID, KPMG employees will be offering skills-based AI services to non-profit leaders to help them understand new capabilities and applications made possible by AI. The KPMG U.S. Foundation, in collaboration with KPMG HUB markets, will also contribute $2.7 million in community vitality grants in 21 U.S. markets to support organizations taking a holistic approach to addressing interconnected issues unique to each community.

Big four consultants’ ‘land and expand’ strategy hammered by scandals [Financial Review]
The value of work tacked on to federal government contracts with KPMG, EY, PwC and Deloitte crashed last financial year, after taxpayers were whacked with extensions worth more than $1 billion in the three years prior. The big four consulting firms secured about $900 million in work starting in 2022-23. Over the following year, the value of those contracts was extended by about $90 million, for a 10 per cent uplift.

KPMG aims to bolster tech consulting position in Rhino.AI deal [CFO Dive]
Big Four accounting and consulting firm KPMG is looking to accelerate its growth as a provider of technology consulting services with a stake in artificial intelligence startup Rhino.AI. “We very much see this as a growth engine for us,” Marcus Murph, head of CIO Advisory at KPMG, said in an interview. “There are still a tremendous number of large enterprises that have significant technology debt.”

PwC appoints Jennifer Mantini as Philadelphia office leader [Consulting.us]
Mantini is the first consulting partner to serve as head of the Philadelphia market, with all prior leaders having been drawn from the assurance business. She succeeds Deanna Byrne, who has led the office since 2017 and is moving on to serve as US assurance leader.

IOC and Deloitte announce expansion of Worldwide Olympic Partnership [International Olympic Committee]
The International Olympic Committee (IOC) and Deloitte today announced an expansion of their Worldwide Olympic Partnership. For the Olympic Winter Games Milano-Cortina 2026 through to the Olympic Games Brisbane 2032, Deloitte will take on the role of Games Technology Integration Partner for the Olympic Games, the Paralympic Games and the Youth Olympic Games.

The post Friday Footnotes: The Bravest of Accounting Firms; Oh STFU, CFOs; How Much Ya Making? | 8.09.24 appeared first on Going Concern.

Good morning! I trust everyone had a good weekend.

Thomson Reuters covers value pricing versus traditional fee. Important quote:

Anyone looking to bring their accounting practice into the 21st century should give that a look.

With the 2024 INSIDE Public Accounting Top 500 officially out, expect many more press releases like this one from RSM:

“As the leading provider of professional services to the middle market, our vision is to be known globally for delivering innovative solutions, lasting value and confidence,” said Jiten Shah, chief financial officer with RSM US LLP. “Being once again named number five on the IPA Top 100 list demonstrates how our global purpose of instilling confidence in a world of change is resonating with clients who turn to us for our insights and services, and with our people who consistently rank us as a great place to work.”

RSM took the fifth spot on this year’s IPA Top 500, we’ll be doing a full dive of this much-anticipated annual dick measuring contest later in the week.

How are CEOs feeling these days? The summer 2024 Fortune/Deloitte CEO Survey finds:

• Seventy-three percent of CEOs are optimistic about their company performance for the next 12 months.
• Over half (51%) of CEOs are confident in their organization’s ability to weather geopolitical instability, which is the top concern of 60% of survey respondents.
• Forty-three percent of CEOs are confident in their organization’s ability to navigate inflation.
• Approximately 4 in 10 (43%) of CEOs have implemented Generative AI (GenAI) into their organizations to drive innovation.

Financial Review says government contracts are way down at down under Big 4 firms. Gee, wonder why?

The value of federal government work outsourced to the big four consulting firms has crashed under Labor, with KPMG, EY, PwC and Deloitte inking just $607 million in new deals last year, the lowest level in five years.

That was down nearly 50 per cent from a peak of $1.2 billion in 2021-22, excluding extensions, with KPMG, EY and PwC all recording substantial revenue falls, which contributed to a wave of layoffs.

LOL PwC. Scyne is the government advisory practice PwC sold off for an Aussie dollar last summer.

Related to the above, Financial Review published an excellent long read on what it was like inside PwC when the tax scandal story was breaking last year, part one in a series.

Describing an emergency webcast attended by the firm’s 900-some partners and led by then-CEO Tom Seymour that broke the news to the partners that some, uh, not good stuff was happening:

He faltered as he delivered his own bombshells: “six to eight” partners who shared the confidential tax information were still at the firm and, worse, Seymour himself had received some of the emails. The disclosures were not well received.

“We thought Tom was going to go,” says one attendee. “We couldn’t believe it, he was quite cocky … when he said he was on the emails, that’s when I knew we were f—ed.”

A second says: “Everyone couldn’t believe he had lied to us. Nobody wanted him as leader. A third says: “Tom was in a really bad state … [he] knew he was toast.“

“The webcast was their first chance to hear from the CEO. On a split screen to Seymour’s right was then-chairwoman Tracey Kennair; she said little, but cycled through various glum expressions,” writes Edmund Tadros.

Go read it.

Here’s a topic we haven’t discussed in a while: IFRS and fair value. Andy Haldane, who is chief executive of the Royal Society of Arts and former chief economist at the Bank of England, writes an FT opinion piece:

Accounting rules rarely arouse excitement — even among accountants. This neglect is misplaced. Accounting is the DNA of capitalism. And accounting rules have been pivotal in shaping the fortunes of companies and economies over many centuries, for good and ill.

Historically, accounting systems have been used to explain the rise and fall of nations ever since their emergence in ancient Mesopotamia. Goethe called double-entry bookkeeping one of the finest inventions of the human mind. Political philosophers such as Adam Smith and Max Weber assigned accounting systems a central role in explaining the flourishing of modern corporations and economies. 

That is not to say these rules have been uncontroversial. A particular bone of contention has been the accounting valuation of assets, whether at market prices (“fair value”) or historic cost.

…

Today, as in Depression-era America, IFRS may not be among the finest inventions of the human mind.

Two recent SCOTUS cases are making CPAs nervous according to soon-to-be-exiting AICPA President, CEO, and 17th century doily collector Barry Melancon:

Two recent Supreme Court decisions involving the power of government agencies are a “big deal” for the accounting profession because they introduce a level of uncertainty that makes some tax practitioners uncomfortable, AICPA & CIMA’s CEO said recently.

The reality, in the area of tax law, is that “our profession generally likes certainty,” CEO Barry Melancon, CPA, CGMA, said on a recent AICPA Town Hall. ” … We like to be able to get to a conclusion. We’d like to know something can be done and [that] there’s this precedent and there’s [an] interpretation that this supports a tax strategy. And there’s going to be a significant amount of uncertainty in these things going forward, absent some new, different court decisions.”

“Under Loper Bright, federal judges can rely on IRS expertise and experience, but they do not have to, she said. Thus, Loper Bright ‘most likely will affect future rulemaking within the IRS.’ Under Corner Post, on the other hand, ‘you could have a regulation that’s over 20 years old, but you’re injured now,’ and since the statute of limitation does not start to run until the taxpayer is injured, the regulation can be challenged long after it was promulgated. This will cause ‘lots of exposure for the IRS,'” said Melanie Lauridsen, the AICPA’s vice president–Tax Policy & Advocacy.

Aaaaand that’s it for now. If you see an interesting story, have a tip, or just want to gripe do feel free to send me an email or text the tipline at 202-505-8885. And you better have a good week OR ELSE.

The post Monday Morning Accounting News Brief: Inside PwC When Scandal Breaks; SCOTUS Makes CPAs Nervous | 8.5.24 appeared first on Going Concern.

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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.

The post Friday Footnotes: It’s BDO and Forvis Mazars’ Turn to Get Yelled at About Audit Quality; Eat Rice Because Deloitte Asked; PwC CEO’s Secret Bonus | 8.2.24 appeared first on Going Concern.

India Today explains why US firms love hiring accountants in India:

Consequently, American firms are increasingly turning to other countries to fill the gap, particularly eyeing India for its highly skilled accounting professionals. Indian accountants, familiar with international accounting standards, present a valuable solution to the US accounting crisis. From a business perspective, offering offshore positions to Indian accounting experts can prove to be extremely beneficial for US firms, helping them lower costs, provide easy access to a global talent pool, and achieve scalability. Given the high demand for such skilled professionals, Indian nationals have an excellent chance to explore lucrative careers in the United States and enable themselves to excel in the global market, contributing significantly to the country’s economy.

…

In essence, the US accounting crisis presents a unique opportunity for Indian accountants. With the help of globally recognised certifications and enrolling in STEM-designated programs, Indian professionals can position themselves at the forefront of the global accounting industry by filling the workforce gap. These pathways not only enhance their career prospects but also ensure they become invaluable contributors to the dynamic US job market, setting the stage for a fulfilling professional journey.

All this time we thought it was going to be robots that take accounting jobs, it was Indians all along. Oh and reminder: the Institute of Chartered Accountants of India (ICAI) is working on a plan to consolidate India’s 96,000 little accountancy firms into mega-firms that they think could compete with Big 4 on the global stage.

INSIDE Public Accounting continues to tease the upcoming release of the IPA 500. Here they talk about the changing face of accounting firms:

While the profession is taking a concerted, multi-pronged approach to increasing the number of accounting graduates and prospective CPAs, IPA 100 firms have had to pivot due to the small pool of potential hires in the meantime.

As a result, last year’s data shows more IPA 100 firms were increasing the hiring of talented non-CPAs. The percentage of non-CPA professionals was 50.3% in 2019, but 55.9% in 2023. The percentage of non-CPA equity partners was 8.0% in 2019, but 10.1% in 2023.

Another weed-loving American firm has gotten hand-slapped by Canadian audit regulators:

According to its enforcement action against Macias Gini & O’Connell, CPAB inspected three audit files and identified significant inspection findings in all three files, which “indicated continued concerns over audit quality.” The action reports a lengthy list of violations of Canadian Auditing Standards and PCAOB rules. At the time of CPAB’s 2023 inspection, MGO audited fewer than 50 Canadian “reporting issuers” (i.e., public companies), and approximately 20 of such companies in the US.

The American firms were particularly active in the Canadian cannabis market. On its Facebook page in 2018, MGO declared that it “proud to have provided professional services to a growing number of cannabis businesses that have successfully gone public in Canada.” As an example of the turbulence in the market, cannabis company Bellrock Brands announced that it had changed auditors from Manning Elliott LLP, which has been censured, to Macias Gini & O’Connell LLP, also censured, due to audit delays.

This news came out on the 17th but we missed it because we aren’t on their PR list. PwC Philippines opened a learning hub:

Isla Lipana & Co./PwC Philippines launches its Learning and Experience Hub, a pioneering facility that combines education, employment and community engagement. Opening on 17 July at the PUP BPO Center, next to the Polytechnic University of the Philippines (PUP) main Manila campus, this groundbreaking initiative sets a new benchmark in bridging the gap between academia and the industry, creating unparalleled opportunities for students and communities.

The hub is the first of its kind in the industry, designed to foster a collaborative environment where learning and practical experience converge. It reflects PwC Philippines’ commitment to innovation and excellence, providing a sustainable platform that significantly supports the holistic development of students and promotes inclusive community development.

Trying to put my finger on which 80s fast food restaurant this looks like…

TIL there’s a firm in the UK with the same name as a certain hot British actor:

Accountancy firm Clive Owen LLP has welcomed 15 new colleagues, including three at its York office, the largest intake of graduates the firm has appointed in its 40-year history.

Clive Owen LLP, which has offices in Darlington, York, Durham and Middlesbrough, has seen a 16% increase in colleagues over the last year.

Now with a 148-strong workforce, the firm is one of the largest independent accountancy practices in the north of England.

I’d make some accounting-related innuendo here but it’s early and I haven’t gotten my daily dose of sugar-free Red Bull yet.

An imported Grant Thornton partner makes a list:

Grant Thornton, one of America’s largest brands for audit, assurance, tax, and advisory services, is celebrating a new award win. Becky Linnett, an Audit partner in the firm’s Miami office, has been named a ”40 Under 40” honoree by the South Florida Business Journal. This prestigious list recognizes talented individuals under the age of 40 who have made an impact in their fields, companies and communities.

In addition to her Audit role, Linnett leads the Real Estate & Construction industry group in South Florida, providing high-quality, personalized services to a wide variety of clients in those industries. These dual roles represent the latest chapter in a burgeoning career on both sides of the Atlantic.

Linnett began her career at Grant Thornton U.K. and moved to the U.S. permanently following a secondment in California. There, she managed relationships with major clients across Southern California and the Bay Area. After developing a stellar reputation for client service, she earned an opportunity to move to South Florida and serve one of the firm’s largest asset management clients. Linnett quickly rose to the position of Audit growth leader for the South Florida asset management practice, and she was named a partner at the age of 34.

We’ll probably write this one up as its own thing but for now, the Financial Reporting Council had another year of record fines against audit firms. However, it was only eight fines total. KPMG’s massive Carillion fine did the heavy lifting to pump those numbers up.

Britain’s accounting watchdog dished out a record amount in fines last year as it concluded a number of high-profile investigations, including into audits of Carillion and London Capital & Finance.

The Financial Reporting Council, which oversees the nation’s audit and accounting firms, issued financial sanctions totalling £48.2 million in the year to the end of March, surpassing the previous record of £46.5 million set in the 2021-22 financial year.

The record fines show that the watchdog is starting to bare its teeth, even before its transition into the beefed-up Audit, Reporting and Governance Authority, which Labour has promised to prioritise.

Earlier:

In government contract news, Washington Technology talks about a possible conflict of interest. Again.

The Government Accountability Office’s denial of Guidehouse’s protest over an audit support contract that went to Deloitte outlines the right way and the wrong way to determine if there is a conflict of interest.

Guidehouse has twice protested the Defense Department’s choice of Deloitte for an $80 million contract to support the DOD comptroller.

As we have previously reported, both protests alleged a conflict-of-interest because one of the DOD officials working on the procurement was a former Deloitte consultant. That person still had a 401(k) from when they were employed by Deloitte.

In the first protest, GAO said that DOD hadn’t documented the investigation into the alleged conflict. In fact, GAO said it could not rule on whether there was a conflict or not because DOD did not provide any evidence of what they had done.

GAO sent the contract back to DOD to investigate the possible conflict.

DOD did that and more. For a second time, DOD awarded the contract to Deloitte and Guidehouse again filed a protest over that DOD official’s connection to Deloitte.

GAO both denied that second protest and laid out what DOD did this time around that mitigated the possible conflict, according to the decision released Thursday.

EY analyzes consumption:

The latest wave of the EY Future Consumer Index found that influencers are growing in their power to shape consumer opinions and purchase decisions. Not surprisingly, their presence in daily social feeds means they are more likely to reach younger consumers (Millennials + Gen Z ages 18 to 49)—66% say they follow an influencers vs. 27% of older consumers (Gen X and Baby Booms ages 50 to 65+). More interesting is the fact that only a quarter (25%) of consumers follow someone for being famous. This significant difference underscores how much brands need to pivot away from tried-and-true marketing strategies so their brands and products can stay relevant to future consumers.

Hold up, millennials are 49 now???? I must have missed that memo, I thought I was the oldest, most geriatric of the millennials at early 40s.

PwC wrote something helpful on the SCOTUS Chevron decision and its potential tax implications:

The United States Supreme Court on June 28 released its opinion in Loper Bright Enterprises v. Raimondo, and Relentless, Inc. v. Department of Commerce, overturning the Chevron doctrine that generally required federal courts to defer to a federal agency’s reasonable interpretation of an ambiguous statute. For more details regarding the court’s decision see our previous PwC Tax Insight: US Supreme Court overrules Chevron Doctrine.

In the tax context, the Supreme Court’s decision to overrule Chevron may result in more legal challenges regarding Treasury and the IRS’s interpretation of Code sections. This more stringent judicial review could invalidate existing Treasury regulations if the courts reach a different interpretation of the statutory text. Specifically, while a court generally was required to defer to an agency’s interpretation of an ambiguous statute under Chevron so long as it was ‘permissible’ (or, more specifically, not “arbitrary, capricious or manifestly incompatible with the statute”), the courts now may hold in favor of a litigant’s challenge to regulations if the regulations do not represent the ‘best’ reading of the statute. This is a potentially significant shift. Taxpayers challenging regulations might find courts more receptive to their arguments, potentially leading to less flexibility for Treasury to effect tax policy changes through regulations and to greater uncertainty in the application of Treasury regulations until Congress clarifies a respective statute or Treasury issues new regulations that withstand judicial scrutiny. 

Aaaaand we’re done. Hope you found that helpful or at least a decent way to waste a few minutes on a Monday. Please email or text if you see an interesting story, have a tip to share, or just want to complain. Have a great week, you.

The post Monday Morning Accounting News Brief: The Age of the Non-CPA; PwC Explains the Chevron Thing | 7.29.24 appeared first on Going Concern.

ICYMI

These are the top stories on Going Concern this week

• You Can Sit for the CPA Exam in the Philippines Now
• Golf Fans Everywhere Now Think BDO Sells Dildos and Lube
• Just How Much Have Accounting Salaries Increased in the Last Five Years?
• Who Wants to See How Much Big 4 Revenue by Service Line Has Changed Since SOX?
• RSM US Had a Good Year

Tax

Super-rich being advised how to avoid Labour tax clampdown, undercover investigation suggests [Isle of Man Today]
Didn’t KPMG get in trouble for this years ago? Yes, yes they did.
The super-rich are being advised how to use a loophole in pensions investments to shelter their wealth from Labour’s clampdown on large-scale tax dodging, the Guardian can reveal. Undercover filming by the Guardian suggests multimillionaire UK residents are being pitched offshore products said to legally protect their fortunes from inheritance tax (IHT) and capital gains tax (CGT). At a private event held a week before the general election, the international accounting brand Baker Tilly told advisers to the ultra-wealthy how they could use offshore pension schemes to shield their clients’ fortunes from tens of millions of pounds of inheritance taxes. One promoter told how his client had placed £30m into a pension scheme to protect it from inheritance taxes. He told an undercover reporter at the exclusive event in the City of London that the government would not legislate to close the schemes down as ministers have “bigger fish to fry”.

IRS shares more warning signs of incorrect claims for the Employee Retention Credit; urges businesses to proactively resolve erroneous claims to avoid penalties, interest, audit [IRS]
The IRS issued today’s five new warning signs to give businesses and tax professionals additional time to prepare for an upcoming announcement involving new steps being taken to counter improper ERC claims. In coming days, the IRS plans to issue more information on new compliance work involving high-risk ERC claims as well as details about an anticipated short-term reopening of the Voluntary Disclosure Program and an important update about impending processing of low-risk payments to help small business with legitimate claims. This follows up on last month’s announcement that the IRS was denying more of the highest-risk ERC claims. “The IRS continues working aggressively to pursue improper claims as well as increase payments going out to businesses with legitimate claims on these complex credits,” said IRS Commissioner Danny Werfel. “As we prepare for the next major announcement, we want businesses to be aware of common errors our compliance teams are seeing, many of which reflect bad advice coming from promoters. The IRS continues to urge people with pending claims or previously approved payments to talk to a trusted tax professional rather than a promoter and see if any of these red flags apply to them.”

In the Workplace

Meet your Gen Z mentor: Why EY is tapping younger workers to bridge the generational skills divide [Fortune]
Professional services firm EY has an informal program called “reverse mentoring,” when two employees of different generations are paired together to share wisdom—with millennials and Gen Z at the helm. The company already has a global mentorship program that has been around since 2020, but EY decided to pilot the smaller concept earlier this year with five pairs of staffers. Dan Black, global leader of talent strategy for EY, tells Fortune the firm unofficially launched the initiative to better connect its dispersed and diverse group of employees. “We have this huge multi-generational workforce, almost 400,000 people, and helping to facilitate how those various generations work together is a really big thing that we continue to work on. That’s where reverse mentoring comes in,” he says.

Are the Olympics Going On?

Why EY, Visa are offering programs to attract athletes, ex-Olympians [WorkLife]
Athletes are disciplined, collaborative and deadline-driven. They usually have excellent time management, public speaking and interpersonal skills that lend themselves to a successful career. WorkLife previously reported on whether athletes perform as well in the workplace as they do in the field. The answer: yes, they usually do. In fact, student-athletes typically see a 60% increase in salary growth, while non-athletes only saw a 45.3% increase, according to data from workforce intelligence platform Revelio Labs. Here’s a deeper look at EY and Visa’s athlete charm offensives.

EY: How is the Olympics Advocating Sustainability in Events? [Sustainability Magazine]
Matthew Bell, Global Climate Change & Sustainability Services Leader at EY, explores sustainability in large sporting events ahead of Paris 2024 Olympics. Compared to other industries, such as fashion, the impact of supply chain and sustainability issues in sports is not as widely known and is complex and difficult to measure. However, it is recognised that unsustainable activities in sports have been contributing to climate change.

News

Four distinguished leaders to be inducted into Spears Business Hall of Fame [Oklahoma State University]
Raised in Oklahoma City, Vickie Carr held various leadership positions throughout her career of nearly 40 years with Deloitte. The multinational accounting firm promoted Carr to partner in 1999. She also founded Deloitte’s National Tax Accounting Group and helped create its Global Tax Accounting Group, which she is leading until her September retirement. Eddy Ditzler is retired from public accounting and lives in Edmond, Oklahoma, with his wife of 39 years, Deniece. He remains active in business as a member of the Board of Directors and the Audit Committee Chair for The Reserve Petroleum Company. Ditzler is also a member of the audit committee of the Oklahoma City Community Foundation. He was honored in 2004 as a School of Accounting Distinguished Alumnus and in 2014 in the “Spears School Tributes: 100 for 100.”

Accounting for the Future: Empowering Tomorrow’s CPAs Today [Seton Hall University]
Seton Hall University recently hosted the “Accounting for the Future” Pre-College program, an inspiring two-day workshop designed to introduce high school students to the dynamic world of accounting. The program, held on Seton Hall’s picturesque campus, brought together students from ten different high schools, including participants who traveled from as far away as Miami, Florida. The workshop was uniquely crafted and led by six talented students from Seton Hall’s CPA Pathway Apprenticeship Program, Phillip Bender, Diana Cavero, Amaury Flores Jr., Michael Lombardi, Daniel McBratney and Tyler Woods, who chose this impactful initiative as their capstone project.

SF accounting firm owes Mitchell accountant $107K in non-compete dispute, high court rules [Mitchell Republic]
The South Dakota Supreme Court has ruled that a now-defunct Sioux Falls accounting firm owes a Mitchell accountant $107,000 after violating the terms of a business purchase. In a 4-0 opinion released Wednesday, July 24, the state’s high court ruled that Sioux Falls-based accounting firm FDJ violated the terms of an agreement to purchase Ross Determan’s Mitchell accounting firm by failing to pay Determan a share of the company’s revenue.

AI

Accountants Need Training in How to Use AI Effectively: Podcaster Blake Oliver [Techopedia]
Technology – from AI to Blockchain – will have huge implications for how accountants work. According to research last year by Moore Global and the Centre for Economics and Business Research in the UK, accountancy firms have spent nearly four-times as much implementing Artificial Intelligence (AI) systems as law firms and other professional services organisations. However, argues influential podcaster and accountant, Blake Oliver, a wholesale change in how accountants are trained is needed so that employees get the most from new tools. And a total overhaul of how accountancy firms work, including attitudes to employee wellbeing, is also long overdue.

Tax & accounting firms optimistic about GenAI, planning and adoption come next [Thomson Reuters]
As the technology around generative artificial intelligence (GenAI) advances, tax & accounting firms are facing an inflection point. Many tax & accounting professionals believe that GenAI will be a part of their future, with more than half saying they believe that GenAI can and should be applied to their work. At the same time, however, many professionals and their firms have not yet explored fully using GenAI for either personal or firm-wide work, and many said that adoption is still years away. Indeed, many tax & accounting firms are still in the early stages of discerning the business implications of GenAI technology, as well as how it fits into their policies and training programs.

Attention CFOs – invest the ‘AI dividend’ and elevate the role of the accountant [Diginomica]
Today, every forward-thinking enterprise and financial organization is exploring how AI and large language models (LLMs) can be integrated into their operations. Sage’s annual CFO research report, The Secrets of Successful CFOs, found that eight in 10 CFOs are embracing AI and automation to save time and increase their own strategic value. But is the excitement warranted? Properly applied, AI can transform and accelerate everything from financial reporting and investor communication to fraud detection, investment analyses, asset allocation, and more.

Pandemic Aid That Isn’t ERC

Pop stars got millions in pandemic aid that raised red flags for their accountants — but they took the cash anyways [Business Insider]
A major Los Angeles accounting firm that caters to music stars was privately worried that its artists could be breaking the law by applying for millions of dollars in pandemic-era grants from the Small Business Administration, court records show. Congress created the Shuttered Venue Operators Grant in 2021 to help theaters and indie music venues stay in business during the pandemic lockdowns. As the name implies, the grants — which were not required to be paid back — were intended for theater owners, performing-arts companies, promoters, producers, and other behind-the-scenes businesses that had no money coming in.

Audit

B.C. accounting regulator criticized for anonymizing member misconduct [Business in Vancouver]
Since March 2021, the U.S. Public Company Accounting Oversight Board (PCAOB) has unleashed a wave of enforcement decisions against B.C. accountants, levying numerous practice restrictions and hundreds of thousands of dollars’ worth of fines against nine Vancouver firms that audit public companies. These penalties were issued under settlements in which the firms did not admit nor deny the serious violations alleged by board investigators. The Canadian Public Accountability Board (CPAB)—the regulator for public company auditors—has taken enforcement action against five of them. However, the Chartered Professional Accountants of British Columbia (CPABC), which is responsible for licensing and governing the 40,000 CPAs in this province, has not disclosed any of these enforcement cases on its website.

Stop undermining small audit firms, banks told [People Daily (Kenya)]
The Institute of Certified Public Accountants of Kenya (ICPAK) has raised an alarm over the prejudicial and partial profiling of some audit firms in the financial sector. “Institute has noted concerns from its members and various stakeholders that some of the Financial Institutions only recognise financial statements that are audited by one of the ‘big four’ audit firms which, they deem, to be the only valid and acceptable audit reports,” said Philip Kakai, Chairman at ICPAK. Kakai stressed that profiling audit firms or determining only financial statements by the “Big Four” as valid or acceptable is discriminatory, irregular, and does not foster competition in the market. “The terminology, ‘the big four audit firms’ is a terminology that does not exist in its regulatory framework as a regulator of all accounting/ audit firms in Kenya,” he added.

Talent

Attention accounting firms: This is your weekly reminder to sign up for Always-On Recruiting from Accountingfly if you’re in the market for talent. You’ll regularly receive a fresh batch of candidates in your inbox to browse at your leisure with no cost and no obligation to hire. Check out this week’s candidates below and find your next great hire today!

Sustainability and Those Other Two Letters

Sustainability reporting, ESG management roles on the rise: Deloitte [Supply Chain Dive]
The accounting firm, which conducted the survey in January, found 49% of respondents were conducting sustainability oversight by including ESG in the companies’ disclosure committee review while 48% were adjusting and accelerating reporting timelines. Respondents almost unanimously — 98% — said they had seen their company make progress toward sustainability goals set last year. Of these, 25% reported “significant progress,” 60% reported “moderate progress,” while 14% reported “minimal progress.” Nearly all respondents indicated they were preparing for increased disclosure requirements.

How CFOs Can Help Meet Corporate ESG Goals: SAP Concur and Deloitte’s Whitepaper [ESG News]
Investors and regulators demand better climate change disclosures, challenging companies to incorporate these into their financial judgments. Emerging regulations, like the EU’s Corporate Sustainability Reporting Directive (CSRD), require comprehensive reporting, including Scope 3 emissions, covering an entire value chain. CFOs are essential in ensuring the accuracy of non-financial information, connecting financial and sustainability data. They should lead ESG disclosures, influencing risk analysis, governance, and third-party assurance. Deloitte found only 37% of firms had CFOs leading sustainability efforts, highlighting the need for more active involvement.

The post Friday Footnotes: The IRS Has Another ERC Warning; Non-Big 4 Firms Get Dissed; Is AI Excitement Warranted? | 7.26.24 appeared first on Going Concern.

You know what does matter? NEWS. Here’s some.

OH MY GOD they’ve gassed up the “Free Candy” van now.

Amid shortage of new blood, accounting firms recruiting teens

Jeremy Cole was throwing candy at high school students on a Tuesday afternoon at Siena College earlier this month.

Not exactly the type of behavior one would expect from an accountant.

But Cole and other professionals in the accounting industry and [sic] willing to try almost anything these days to address a growing workforce crisis caused by two major trends.

The reasons: mass retirement of boomers and declining accounting grad numbers. Same old.

Related:

If you were curious, CrowdStrike is a PwC client.

The company’s annual report, filed in May, shows a confident position with the company telling its investors that Falcon is the future of the cybersecurity industry.

“Using cloud-scale AI, our Security Cloud enriches and correlates trillions of cybersecurity events per week … to create actionable data, identify shifts in adversary tactics, and automatically prevent threats in real-time across our customer base,” the filing reads. “The more data that is fed into our Falcon platform, the more intelligent our Security Cloud becomes, and the more our customers benefit, creating a powerful network effect that increases the overall value we provide.”

The filing includes an audit report from CrowdStrike’s accounting firm PricewaterhouseCoopers LLP. That audit found healthy numbers for the company, with an increase in revenue and shareholder equity year-over-year from 2023.

Further reading: ‘Painful’ wake-up call: What’s next for CrowdStrike, Microsoft after update causes outage?

This gent has no idea what he’s in for. But he’s already wearing the right shirt.

The firm is called Ashmole & Co. Say that three times fast.

Former Trump Organization CFO Allen Weisselberg was released from Rikers on Friday:

“Allen Weisselberg was released from custody today and has been reunited with his family,” his attorney Seth Rosenberg said Friday.

Friday’s release marks the second time Weisselberg completed a sentence at Rikers. In 2022, Weisselberg pleaded guilty to 15 state crimes related to a scheme to evade more than $1.7 million in taxes, and received a similar five-month sentence, after which he was released after 100 days.

NASBA’s soon-to-be CEO Daniel Dustin made some leadership picks that will be effective August 1:

The National Association of State Boards of Accountancy (NASBA) President and CEO elect Daniel J. Dustin, CPA, has selected Kent A. Absec, Brenner Allen, Esq., William A. Emmer, CPA, and Sedrik Newbern to join the leadership team at NASBA, effective August 1, 2024. These changes to leadership follow the retirement of current NASBA President and CEO Ken L. Bishop.

Earlier:

EY Germany’s former top dog is fighting the big ass fine he got for Wirecard:

EY’s former Germany boss Hubert Barth is to challenge a €300,000 fine for alleged violations of professional duties during the Big Four firm’s audits of Wirecard.

Germany’s audit watchdog Apas last year fined EY €500,000 and banned the firm from taking on any new listed audit clients in Germany for two years over its failings. It also announced penalties of between €23,000 and €300,000 to five unnamed current and former staff. These fines against individuals were formally imposed last month.

The largest of the personal fines was for Barth, according to people familiar with the decision. His lawyer Jan Bockemühl told the Financial Times that he would appeal against the Apas decision on behalf of his client as he considered it “incorrect” from both a legal and a factual point of view.

KPMG and Avalara have entered a “formal alliance.”

Avalara, Inc., a leading provider of tax compliance automation software for businesses of all sizes, today announced a strategic alliance with KPMG LLP, the audit, tax, and advisory firm to deliver greater value to enterprise businesses across industries. The new alliance allows organizations to leverage the combined power of Avalara’s compliance automation technology – including indirect tax calculation, returns, exemption certificate management, cross-border compliance, e-invoicing, and registrations – and KPMG’s deep expertise in tax consulting and advisory, in addition to ERP implementation capabilities, resulting in improved tax compliance management, operational efficiency, and risk management.

Elsewhere in the House of Klynveld, AFR’s Neil Chenoweth writes about some old ghosts coming back to haunt the firm in Australia:

For the past 11 months, the firm has been studying historical allegations with varying degrees of focus. This follows a complaint made by a former, quite senior, partner about KPMG people behaving badly, much of it dating from the 1980s and ’90s (this masthead has written recently about Chris Jordan’s time at KPMG, but this is unrelated to that).

Where to begin? Perhaps with the partner who is alleged to have had a client replace his garage door in 1994, a second client who painted his house, and a third client who handsomely provided the partner with a Nissan Maxima sedan: all of these services were in return for writing off their KPMG fees.

Talk about full service. It’s quite a progressive payment arrangement. So little paperwork.

There are allegations of accessing client trust accounts to strip out tax losses; partners taking secret commissions; diverting the residual of a client’s estate to a partner’s private company; and moving $7000 from a company which was being transferred overseas into the KPMG trust account. Apparently, an enterprising partner used that money to buy a jet ski. As you do.

And this might be the craziest of all the former partner’s claims:

The most picturesque claim is that in 1984, a partner allegedly had his wife smuggle $625,000 in cash from Singapore into Australia in her handbag for a client (yes, a KPMG spouse is the one with the giant clutch purse). This was after attempts to order staff members to carry the money failed to generate the necessary enthusiasm.

Governing writes about TV and film tax credits. TLDR they’re losers for the states:

From Marvel blockbusters to “The Walking Dead” series, many big hits have been filmed in Georgia due to the state’s massive production tax credits. Set at 30 percent with no cap on the number of credits that can be bought or sold, Georgia’s tax credit is one of the biggest in the country.

But Georgia was among several states where legislators have been reconsidering their film and TV tax credits. Following a state-funded audit last December that found the state loses money on the billion-dollar program, legislators proposed a bill to place caps on it.

The bill didn’t pass. State Rep. Long Tran, a former actor and stunt driver, says it’s too early to make big changes, especially with the industry just finding its footing again after COVID-19 destabilized the global film industry. “I’d like to see us hold off on making any changes for five more years,” Tran said before the bill was defeated in the state Senate. “But if we have to make a change, let’s do something that stabilizes the industry and makes people confident that they can come here.”

Think I’m gonna call it here. As always, dear reader is encouraged to reach out with any comments, complaints, compliments, or concerns. Text the tipline or send me an email if you know of some good happenings we should be talking about. Have a great week, you.

The post Monday Morning Accounting News Brief: They’ll Try Anything But Salary Increases; KPMG Partners Were Wildin in the 80s | 7.22.24 appeared first on Going Concern.

This one from Fast Company is sort of related to accounting right? It certainly affects firms, particularly Big 4, as they require yearly sacrifices from the God of Higher Education to keep the machine grinding away.

The college-to-corporate pipeline is facing extinction. Here’s why

A third of Gen Z is skipping college before joining the workforce—and opportunities in the internet economy are a major reason why. It’s an inflection point that decades of corporate dread have been building toward. 

As the first generation to be raised by the internet, Gen Z didn’t spend our childhoods outside—we spent them online. We exchanged ideas and connected with one another over chatbots long before we learned how to prepare for an interview or apply for a job. We participated in makeshift economies in virtual games long before we opened a bank account or submitted a summer job application.

Our comfort in exploring the internet is why we don’t feel tied to traditional models of work and life that kept people busy for decades—especially as burnout, low wages, and debt continue to dominate headlines post-pandemic. For Gen Z (and the generations to come) inheriting this new reality, the question has evolved from “Where should I apply to college?” to “How can I make money online?”

This doesn’t bode well for the already unpopular accounting track.

An Ohio firm, Payne Nickles & Co. CPAs and Business Advisors, celebrates some promotions in the Sandusky Register. Check out this blurb:

Brennan Otto, a certified public accountant, recently received a promotion to partner in training in “recognition of his dedication, hard work and contributions to the firm,” according to a company statement.

Otto’s journey with Payne Nickles & Co. began as an intern during the tax seasons of January 2015 and January 2016 while he was still completing his degree. After graduating from Kent State University in 2016 with a bachelor’s degree in business accounting, Otto joined the firm full-time in December 2016.

In October 2018, Otto left Payne Nickles to explore opportunities elsewhere. But “recognizing the strong professional environment and growth opportunities at Payne Nickles, he returned to the firm in October 2019,” the statement read. “His experience during this period enriched his perspective and expanded his professional expertise.”

We probably won’t be writing up the recent PCAOB inspections for Deloitte Canada and Canadian megafirm MNP unless this week ends up being an accounting news desert (it’s mid-July, it could be) and we get desperate so here’s Canadian Accountant:

The Public Company Accounting Oversight Board in the United States released two new audit inspection reports this past week for Deloitte Canada and MNP LLP. After finding fault with Canadian audit quality in recent years — not only with regional accounting firms but with members of the Big Four in Canada — the US audit watchdog found little fault in its most recent reports.

MNP received a clean bill of health from the PCAOB for two audits inspected in 2022. According to the inspection report, the PCAOB found “no deficiencies that were of such significance that we believe the firm, at the time it issued its audit report(s), had not obtained sufficient appropriate audit evidence to support its opinion on the issuer’s financial statements.”

The conclusion is in stark contrast to the PCAOB’s previous inspection of MNP, which occurred in 2019, when it found deficiencies in 67 per cent of the three audits it reviewed.

Deloitte Canada’s inspection report focused on five audits inspected by the PCAOB — the same number inspected by the PCAOB in 2021. In both cases, the US audit watchdog found deficiencies in 20 per cent of the audits reviewed, four of which were audits in which the Big Four accounting firm was the principal auditor. In Deloitte’s audit of “Issuer A,” the PCAOB identified deficiencies in the firm’s financial statement audit related to revenue, for which the firm identified a fraud risk.

Grant Thornton snagged a CFO Advisory principal with an impressive resume:

Grant Thornton today announced that Krystn Hammond has joined the firm as a CFO Advisory principal within the Advisory Services practice.

With more than 15 years of experience, Hammond has advised pharmaceutical and life sciences clients on transactions and tax restructurings, including acquisitions, divestitures, spin-offs and intellectual property migrations. Her experience spans across industry subsectors, such as big pharma, biotech, medical devices and diagnostics, generics, specialty, animal health, consumer and services.

Chipman69 will appreciate the quote she gave for the press release:

“I’m grateful to be part of a firm that sets exemplary standards in everything from client service to company culture,” said Hammond about her new role at Grant Thornton. “I look forward to working with a team of dynamic valuation professionals to help our life sciences clients make well-informed strategic decisions to add value to both patients and shareholders.”

Deloitte released the results of its 2024 Back-to-School Survey and says K-12 parents will be spending “cautiously” this upcoming school year:

• Back-to-school spending for K-12 students will likely remain flat, estimated to reach a collective $31.3 billion, or approximately $586 per student, according to those surveyed.
• Surveyed parents plan to decrease their spending on technology products by 11% year-over-year while increasing spend on other categories like personal hygiene and educational furniture by 22%. Spending on clothing and school supplies remains unchanged.
• Shoppers surveyed prioritize retailers offering value and convenience as mass merchants (77%) and online retailers (65%) are top destinations. In search of deals, parents plan to shop across 4.7 retail formats on average, up from 3.9 in 2023, and may sacrifice loyalty to stay within budget.

The new EY AI Pulse Survey asked 500 US senior leaders across industries about their AI technology investments, impacts and challenges. Here’s what they learned:

After more than a year of hype around generative AI’s potential, business leaders report that they are already seeing a return on their artificial intelligence (AI) investments and plan to increasingly become more bullish, according to new data from Ernst & Young LLP (EY US). Among the 95% of senior leaders who report that their organizations are currently investing in AI, the number of companies investing $10 million or more in the technology is set to nearly double next year to 30%, up from 16% currently investing at that level. However, despite the forecasted investment boom, the survey also found that many leaders are ignoring the foundational functions AI needs to thrive.

This contradicts the findings of Lucidworks’ Generative AI Global Benchmark Study released in June:

Who even knows. I’m convinced many of the CEOs and CFOs surveyed for these things have no idea what AI can really do, they just say they’re making investments in it to seem with it and cool. See this weekend discussion: Does Leadership Even Know What Gen AI Is?

And here’s World Economic Forum on young people and AI:

How young workers can thrive with AI when they have the right skills

For the young, the future is still unwritten. This reality can bring both excitement and uncertainty.

Today’s young people are entering the world of work at a defining moment, just as AI begins to transform it. This prospect may give rise to conflicting emotions. On the one hand, they might feel excited that AI can help them work more quickly and efficiently while making their jobs more enjoyable. On the other, they may be concerned that AI is reshaping the job market as they start their careers.

So, how is AI transforming the workplace – and how are young people navigating this shift? Recent research from PwC helps to shed new light on these questions. And the resulting insights confirm that while AI radically changes the world of work, young people who learn to harness it can open up enormous opportunities.

Moreover, young people appreciate the opportunities that AI brings to them and their careers, suggesting they can – and will – fully embrace its potential in the years to come.

Investor Place discusses three stocks that are sorry they used ‘sham audit mill’ BF Borgers:

• Trump Media & Technology Group (DJT): The embattled social media company hardly inspired confidence.
• SS Innovations (SSII): The BF Borgers scandal may upend the medical device company’s efforts to raise funds.
• Red Cat Holdings (RCAT): This small drone company isn’t ready to take off yet.

Related:

An Indianapolis CPA with one of those fancy .CPA domains from the AICPA went overboard on making clients happy:

An Indianapolis-based Certified Public Accountant (CPA) pleaded guilty in federal court to filing false tax returns for his clients and participating in an illegal tax shelter that cost the IRS millions.

Jason L. Crace, the founder of Crace.CPA, pleaded guilty in federal court on Wednesday to participating in an illegal tax shelter. He will be sentenced on Jan. 14, 2025, and faces up to three years in prison.

According to the United States Department of Justice, Crace helped clients in Mississippi and elsewhere file false business deductions for so-called “royalty payments” in the amount of millions of dollars between the years of 2013 and 2022.

The DOJ argued that Crace knew these “royalty payments” were circular flows of money purposely designed to give the appearance of genuine business expenses.

FedScoop talks about Direct File and how the IRS got it right:

The way Merici Vinton tells it, the first official user of the IRS’s Direct File pilot nearly had tears of joy in her eyes when she submitted her return to the free electronic filing program, a milestone for the tax agency and a potential game-changer for frustrated taxpayers across the country.

There was only one problem: a bad connection that resulted in that maiden filer’s return getting stuck in a queue.

“This would have been a failure,” said Vinton, deputy service owner for Direct File. “And not just a failure — our users wouldn’t have had trust in it.”

The reason it wasn’t a failure is that the Direct File team noticed the issue right away, resetting the connection to quickly free the return from its digital abyss. And thanks to a controlled rollout to only a limited cohort of volunteers and government employees, the system’s inauspicious start was a blip and not a death knell.

Earlier:

And that’s that. Should you have a tip or news story you think we should write about, reach out via email or text (anonymously) and I’ll be happy to take a look. Have a fantastic week, you deserve it. Later!

The post Monday Morning Accounting News Brief: Gen Z Shuns College For the Internet; A DYNAMIC Grant Thornton Hire; Tax Shelter Backfires | 7.15.24 appeared first on Going Concern.

I don’t expect there to be much news out there today, maybe the profession watercooler will surprise me.

I found out from Reddit over the weekend that AI is going to put both you and me out of a job. Redditors seem to know it all so I guess we should believe him.

EY’s Dan Black wrote something for Fast Company warning all of us in the workplace to get ready for Generation Alpha because they’re coming.

I can still vividly remember my first day at EY nearly 30 years ago. Back then, I was part of the young “new start class” that was so starkly different from the existing employees with our cutting-edge pagers and trendy single-breasted suits.

Reading this I know exactly what kind of haircut Dan had back then.

It’s hard to believe that Gen Alpha (born between 2010 and now) is set to begin entering the workforce in just six years, adding a new dimension to the multigenerational workforce. The arrival of Gen Alpha to the labor force will bring new technology, approaches to work, and expectations about the workplace that don’t yet exist. As a global recruiting leader, I’ve seen the shift firsthand. Today, younger workers are seeking careers that are flexible, personalized, and experience based.

Fortunately, the science and art of welcoming a new generation to the workplace is a practice that’s been happening since time immemorial. But companies should start preparing now for this new workforce dynamic.

Then he gives some actual advice so go read it. On your iPad, Gen Alpha-style.

Inc. wrote about how the CPA shortage is impacting startups and reminds us all that unassuming accountants are the guardians of the entire capitalist financial system as we know it. Without a fresh supply of them to keep watch, we’re boned. We might already be boned. Not sure yet. Actually, there were plenty of accountants standing around in 2008 and we survived that so, hey, it’s probably not so bad.

For many early-stage and smaller companies, accountants serve as de-facto financial advisers in place of a CFO, and right now, in a tricky environment of higher interest rates, elevated costs, and tighter margins, entrepreneurs could really use some professional guidance. But with depleted ranks, accounting firms are struggling to keep up with demand, and founders say they are struggling to get the answers they need.

“Small businesses are out there going: I need this help. It’s a tougher economy today,” says Ben Richmond, a certified public accountant who manages the U.S. client base for the small-business accounting software platform Xero. “The challenge is a lot of the firms aren’t either resourced with the right technology or enough people to get to that.”

For founders, regardless of whether they use a big four auditor, an independent firm, or an automated DIY solution, this headache will not affect tax season, says Richmond. “You’ll have no issue finding someone to do your tax return,” he explains. “But if you want the help of a true business partner or an advisor, that’s where there’s not as many firms out there,” he adds. “Firms are struggling to get through just the basic workload they have.”

On the topic of the accountant shortage wreaking havoc on capital markets, the Robert H. Smith School of Business at the University of Maryland published this:

The Accountant Shortage Highlights How Critical Accounting Is to Capital Markets

Last summer NPR’s Marketplace aired a story about the nationwide shortage of accountants. That caught the attention of Professor Rebecca Hann, Assistant Dean of Doctoral Programs and Dean’s Professor of Accounting at the University of Maryland’s Robert H. Smith School of Business. Intrigued by the report, she pondered, “How can we quantify the cost of an accountant shortage?”

This question led to the study entitled, “The Price of an Accountant Shortage: Evidence from Job Vacancy Duration and Internal Control Weaknesses.” The research co-authored by Hann, Smith PhD candidate Jingwen Yang and Yue Zheng, assistant professor at Hong Kong University of Science and Technology, reveals that prolonged accounting vacancies increase a company’s vulnerability to accounting errors, leading to weak internal controls over financial reporting.

“There’s growing evidence of firms struggling with late filings,” says Hann. The accountant shortage has left numerous companies unable to file their quarterly and annual financial statements on time. This highlights the critical role accountants play in ensuring timely and accurate financial reporting. When filings are delayed and accounting mistakes occur, it can jeopardize a firm’s ability to raise capital and maintain investor confidence.

Here’s a crazy idea coming out of Australia: tying pay to audit quality. With a touch of public shaming, something we’re always in favor of.

Audit firms should be publicly ranked and auditors’ compensation should be tied to the quality of their work rather than the amount of money they bring in, the Institute of Public Accountants says.

The IPA’s proposal, addressed to the Treasury, aims to address a culture among audit firms it said prioritised efficiency over effectiveness and created conflicts of interest.

“Economic fundamentals suggest that incentives drive behaviour,” the accounting body’s submission said. “If revenue generation drives compensation, then it may be given priority over conflicts of interest.”

The Treasury is considering reforms to the accounting and auditing sector, including splitting off audit services, in response to the PwC tax leaks scandal and the subsequent parliamentary inquiries that raised concerns with multidisciplinary firms’ audit practices.

We assume this means strictly upper-level auditor pay because let’s be honest, associates have zero individual responsibility for audit quality good or bad. Making their pay any worse will only make recruiting problems that much tougher.

I don’t think we’ve written a standalone story about this topic but we’ve been keeping an eye on the government of India’s desire to consolidate its 96,000 accounting firms into a few big ones that they think could compete with Big 4 on a global scale. Y’all didn’t think they were going to be content to do our busy work for peanuts forever, did you?

Anyway, here’s the latest on that:

The CA Institute has made two key decisions to create a supportive framework for the aggregation and expansion of CA firms, President Ranjeet Kumar Agarwal announced.

One of them is related to relaxation of the existing five-year demerger norm to a ten-year period. Earlier, firms going in for a merger can regain their legal names if they do a demerger within five years. After five years, they will lose the chance of getting back their old names.

This period is now extended to ten years.

The second decision is on allowing Limited Liability Partnership (LLP) to become a partner in another LLP. “By retaining the two firm identity intact, the two firms can still come together and work with combined strength to bid for projects and deliver. There will be combined resource and combined expertise,” Agarwal said.

We’ll continue to monitor developments. I don’t think anyone should be scared.

KPMG got a nice little write-up in Ad Age of all places. Well, it was an interview with KPMG CMO Lauren Boyman and it’s tagged as “Opinion.”

Here she talks about an AI-hosted podcast booth:

Have you developed customer-facing marketing initiatives?

One of the objectives that we had within marketing was to create AI-driven brand experiences. We wanted to share the art of the possible and enhance perceptions of KPMG.

We recently introduced KPMG Skylar—an AI-hosted podcast booth. We created this interactive AI experience to help our audience understand the power of what AI can do, and just how natural it can feel to interact with it.

The technology behind the experience uses a combination of AI services, starting with speech-to-text technology to recognize speech input, which is then passed through a series of generative AI prompts to ensure the response is safe before generating an AI response from Skylar. We launched Skylar at this year’s SXSW and since then, the experience has “gone on the road” to many events and sponsorships. It’s helped expand our brand perception in the AI space.

Found this guy tweeting about it:

KPMG presents ‘Skylar’ as part of our brand activation at #SXSW24 this weekend!

In addition to sponsoring, advising, and judging the SXSW24 Startup Pitch Competition this year, we’ve built a #GenAI-powered podcast experience where our host ‘Skylar’ will interview conference… pic.twitter.com/Wcdd9u1EBj

— Richard Entrup (@entrup) March 9, 2024

He really loves AI, you guys.

Fun fact, if you start typing ‘KPMG Sky—‘ into Google it suggests “KPMG scandal” instead. Perhaps because not much has been written about KPMG Skylar whereas scandals…

We done? Yeah, I think we’re done. As always, I’d appreciate it if you reach out should you come across any interesting stories we haven’t written about or have some dirt to share. Email is fine but text is best. Stay cool.

The post Monday Morning Accounting News Brief: Should Partner Pay Be Tied to Audit Quality?; Capital Markets Cry Out for Accountants | 7.8.24 appeared first on Going Concern.

Private Equity

Private Equity and the Ethics of a Profession [CPA Journal]
Writes Richard H. Kravitz, MBA, CPA:
The recent multibillion-dollar investment by private equity in a major CPA firm reminded me of the concerns that I raised in an article that I wrote 15 years ago in the November 2009 CPA Journal (years before I joined our editorial team), called “Socially Responsible Accounting: A Call for Reform of the Profession” (https://www.nysscpa.org/0911-rk)…Having worked for two private equity firms during my career, I can say that our objective was to restructure the acquired organization, eliminate investments that would not be realized in the short term, cut marketing and new product development spend, reduce technology investment, optically dress up the company, and then sell it to another PE company. Might consolidation result in fewer independent audit firms and fewer auditors? Might this result in even more adverse audit assessments? Furthermore, who will protect the investing public if there are fewer independent auditors? Who will audit the financials of publicly traded corporations? Even today, “A lack of trained accounting staff was cited as a control issue in 48.7% of adverse auditor assessments and 71.5% of adverse management assessments.”

People

Former Livingston student’s rise in the accounting world [East Texas News]
Robert Belt, whose firm Belt Harris Pechacek was acquired by Crowe this year, talks about how getting ripped off by his sisters inspired him to serve the public interest as a CPA.
“Mr. Windham said, ‘Get something behind your name like a doctor or CPA.’ Those simple words stuck. Years earlier playing the board game Monopoly I was the victim of a fraudulent Ponzi-embezzlement scheme perpetrated by my own sisters, Darla Belt Dear and Dana Trujillo. I guess that childhood board game taught me a lot about how easy it is to take advantage of someone’s trust and the need to protect the public,” Belt said.

Big 4

PwC Is Grappling With an Exodus of Clients and Staff in China [Bloomberg]
PricewaterhouseCoopers LLP’s regulatory troubles in China have caused an exodus of clients and led some of its accountants to seek out jobs at rivals, casting doubt over the firm’s prospects in the world’s second-largest economy. Since March, more than 30 publicly listed companies based in mainland China have dropped PwC as their auditor, according to stock-exchange filings.

EY’s new boss leaves strategic questions unresolved [Financial Times]
Janet Truncale presented Carmine Di Sibio with luggage tags at a joke-filled retirement party at New York’s Glasshouse venue last week, cheekily referencing how he would have to get used to travelling commercial again. Truncale finally picked up the keys to EY’s corporate jet on Monday, seven months after being chosen to succeed Di Sibio as global chief executive of the Big Four accounting firm. Now she also has to pick up the pieces from the collapse last year of his plan to split the firm in two.

Senate reveals $4 million Burrowes pay packet [The Mandarin]
PwC Australia CEO Kevin Burrowes earns $4 million a year for rolling up his sleeves to fix the global franchise’s local arm, according to a response to a question on notice from Senator Deborah O’Neill. O’Neill asked the firm for further details of Burrowes’ remuneration package given the firm had previously told the Colbeck inquiry into government procurement that the remuneration package was $2.4 million. This was later corrected to $2.8 million. The firm’s response to the questions on notice provides further details of Burrowes’ complete package, including a payment from PwC International Limited for the work being done in Australia. “As the Committee may be aware, the leadership of PwC’s global network of member firms (the PwC network) requested Mr Burrowes to consider taking the role as CEO of PwC Australia on short notice and during a difficult period for the PwC Australian partnership,” the firm’s response says. “That role required Mr Burrowes to leave a senior global role with the PwC network, retire from the Partnership of PwC UK and to become a partner of PwC Australia, and that he be remunerated for that role as a partner of PwC Australia.”

Technology

China Thrashes U.S. In Global AI Patent Race—Here’s Why That Doesn’t Mean It’s Winning The AI War [Forbes]
China vastly outpaces international rivals in the global race for generative AI patents, a new United Nations report revealed Thursday, leaving the United States and other nations lagging far behind as they vie for a strategic edge and leadership over the transformative technology.

Google’s carbon emissions surge nearly 50% due to AI energy demand [CNBC]
Google’s emissions surged nearly 50% compared to 2019, the company said Tuesday in its 2024 environmental report, marking a notable setback in its goal to achieve net-zero emissions by 2030. Google’s emissions also increased 13% year over year in 2023, per the report. The company attributed the emissions spike to an increase in data center energy consumption and supply chain emissions driven by rapid advancements in and demand for artificial intelligence. The report noted that the company’s total data center electricity consumption grew 17% in 2023.

A deep look into burgeoning blockchain audit [South China Morning Post]
Unlike standard financial audits for public firms, smart contract audits focus on the integrity and completeness of a piece of computer code as opposed to financial statements. A new study by Janja Brendel, Assistant Professor of the School of Accountancy at the Chinese University of Hong Kong (CUHK) Business School, found that the smart contract audit market is thriving.

Narrowing the workplace’s AI ‘trust gap’ [Accountancy Age]
The lack of confidence and trust between employees and employers, known as the AI Trust Gap, is not surprising given the relative immaturity of GenAI and the exponential pace at which technology is evolving. The World Economic Forum (WEF) reported this year that only 55% of employees are confident their organization will ensure AI is implemented in a responsible and trustworthy way and 42% believe their company doesn’t have a clear understanding of which systems should be fully automated and which require human intervention. To unlock AI’s full potential, our organizations will need to bridge this trust gap and ease lingering trepidation.

Talent

How AI can increase well-being by reducing risks [Thomson Reuters]
The reality is that many of today’s professionals are stressed and burned out. Accounting professionals are no exception. While it is true that the industry professionals has long been associated with high-risk work and ever-changing laws and regulations, the call for more efficiencies in performing work and a better work-life balance has perhaps never been louder.

Attract, retain, and upskill tax talent in era of AI [Thomson Reuters]
“The focus on retaining, attracting, training, and upskilling talent should remain a top-of-agenda organizational issue if businesses are to continue to provide the value that customers and stakeholders have come to expect, especially as we put more emphasis on the tech changes that are disrupting all industries,” stated Thomson Reuters CEO and President, Steve Hasker.

Navigating the Talent Crunch: Harnessing AI to Overcome Talent Shortages in Finance and Accounting [Mike Whitmire of FloQast via Nasdaq]
When AI and automation are leveraged to perform mundane and time-consuming tasks, finance and accounting professionals have more time to focus on other responsibilities, such as more complex financial analysis or strategic decision-making. In fact, a study from SmartSheet found that, when tedious aspects of jobs were automated, workers regained six or more hours of their time per week. This benefit is significant because 40% of finance activities can be fully automated (McKinsey). With this additional time to focus on more strategic or goal-oriented work, accounting and finance professionals might experience higher levels of job satisfaction and improved feelings of fulfillment.

News

58% of CFOs have increased FP&A focus since last year: PwC report [CFO]
The skills required for a CFO to meet today’s FP&A demands continue to expand. CFOs are more active in the decision-making processes of the business, must leverage cost-efficient technology both within the finance function and beyond and using data in the decision-making process. Because of this, finance leaders are looking at improving their FP&A skills and talent to help further the business. In the most recent PwC Pulse Survey, this transformation continues to be evident. More than half of the CFOs they surveyed (58%) said they’ve increased their FP&A focus since last year.

Government working on aggregation of CA firms, accounting standards for insurance sector [The Economic Times of India]
New Delhi: The government, along with the chartered accountants’ body ICAI, is working for aggregation of accounting and auditing firms in the country to make them global players, a senior official said on Monday. The aim is to have the ‘Big Four’ accounting and auditing firms from India, and efforts are already on.

Rapid change leaves Moroccan firms in unfamiliar territory [International Accounting Bulletin]
​​​​​​​The development of the economy and the changes in the global environment has resulted in a complete change in how Moroccan accounting firms do business. “Crucial challenges relating to profitability and workforce renewal remain major issues,” said Najat Moughil, partner at Exco ACDEN, a Kreston Global member firm. “The evolution of client expectations, the rise of pricing pressures and the aging of the professional population introduce complex dynamics, requiring an agile adaptation of accounting firms.”

The post Friday Footnotes: The Ethics of Private Equity in the Profession; Staff and Clients Ditch Tainted PwC; Talent > AI | 7.5.24 appeared first on Going Concern.

While Saturday’s post didn’t get many on-site comments, a pre-discussion tweet I posted related to the weekend discussion topic blew up on Twitter. You are invited to weigh in on either. Or neither. We’re low pressure over here.

Has anyone successfully negotiated a decent raise by coming to your employer with an offer from another firm and threatening to leave?

Heard a funny story today from a recruiter about that strategy backfiring pretty bad on a candidate. Will share later.

— Going Concern (@going_concern) June 28, 2024

CFO writes about how finance pros are rebranding career expectations and spoke to a real asswipe:

Finance and accounting, as lifelong, fulfilling careers, have a marketing problem. Contrary to what is taught in accounting programs across the country, the final stages of a career in finance and accounting aren’t only a life sentence on a partner track at a public accounting firm. Instead, the options that younger generations crave — entrepreneurship, impactful leadership, social media following and overall success — are all accessible in finance and accounting in a variety of interesting ways.

There are plenty of great potential business ideas that, for a variety of reasons, never come to fruition. However, Jeffrey Klimkowski, CFO and co-founder of DUDE Products, the brand that sells DUDE Wipes, left his high-paying dream job as an investment banker to build a business with his friends. Now as a CFO, he says the decision-making processes he gets to be a part of when it comes to business marketing spend are some of the best parts of his job.

The benevolent overlords of TurboTax and QuickBooks have released an accountant technology survey:

A new Intuit QuickBooks survey shows that while the accounting industry has felt the shockwaves of changing economic conditions, accounting professionals believe that failure to keep pace with technological advancements is the greatest risk to the industry — ahead of higher interest rates, the rising cost of goods, and widespread hiring challenges. These findings and more are highlighted in the 2024 Intuit QuickBooks Accountant Technology Survey, commissioned by Intuit.

The survey of 700 accountants in the US underscores the critical role of technology in meeting growing client expectations, addressing hiring shortages, and improving operational efficiency while maintaining a positive outlook on the industry’s future.

It’s probably going to be an excruciatingly slow week over here so we’ll dive into the survey results later this week.

I went to r/accounting to pull up some of the fire anti-private equity memes I’d seen over the weekend but instead I found these two posts sitting right next to each other in the “Hot” tab.

I actually cannot with our India team..
byu/wordup2u inAccounting

Why the fuck do we offshore shit
byu/One-Professional6229 inAccounting

The second is interesting as OP works in industry.

Why the fuck do we offshore shit

Why the fuck do we offshore shit

I’m working in industry – not even Big 4. My life is misery working with those fucking offshore teams. Every single time when we’re dealing with a local vendor, our managers decide for some goddamn reason, it’s a good idea for the team in India to send invoices or talk directly to them. Why the fuck do they think something like that is a good idea? And then when they fuck up, I catch the heat because I’m the one who’s meant to be babysitting them – never mind this is my first job right out of university and I can’t even take care of my own work. My managers end up having to step in and do shit on my behalf. Fml

Also – their dumbass deadlines for posting journals, the fact their timing is not aligned with ours, the fact they don’t stop and question things or even use critical thinking.

Reminder that in 2011, PwC was offshoring only 1-2% of its audit work with a goal to hit 20% by 2014. My how quickly things change.

WCVB in Boston celebrates Deloitte Impact Day. Nice enthusiasm, guys. You all look utterly thrilled.

The first several seconds are painful.

Business Insider on the AI consulting boom:

It’s possible to pose almost any question to artificial intelligence.

But when it comes to how to use the technology, many companies are directing their inquiries to consulting firms instead.

Doling out advice on AI is making up a growing share of many firms’ work. Some 900 of PwC’s top 1,000 consulting clients are now working with the firm on incorporating AI into their businesses, a spokesperson told Business Insider.

In 2023, McKinsey & Company brought in a record $16 billion in revenue, partly due to the generative AI boom. Almost 40% of the company’s work now relates to AI. And much of that is now moving to GenAI, Ben Ellencweig, a senior partner who leads alliances, acquisitions, and partnerships globally for McKinsey’s AI arm, QuantumBlack, told BI.

Boston Consulting Group, for its part, now generates a fifth of its revenue from AI, and much of that work involves advising clients on GenAI, a spokesperson told BI.

God I really hope this doesn’t end up like blockchain.

This guy from Bristol — a young, gay, an ambitious man (his words) — talks about his path to accounting and what he’d like to see more of when it comes to recruiting the next generation of number-crunchers:

Ben Steele is a certified chartered accountant with 17 years of practice. He specialises in cloud accounting, tech, and app integrations.

As the managing director of Streets Steele accountants, Ben steers the Bristol office and focuses on serving the hospitality industry, particularly food and beverage businesses.

Tell us about one (or more) of the people who inspired you along the way?

The original inspiration for my career came from my parents (I know…cheesy!) My Dad was one of the most ambitious and solid workers I know – creating anything and everything into a business. Despite being someone without an academic background, he knew how to create & grow a business, and connect with people.

My Mum showed me what it was to be fully committed to something, and strive for better, whilst staying loyal and grounded.

Then whilst training, I had a manager called Susan. She taught me what it was to be an Accountant. Her ethics and eye for detail were unwaivable. Not a single penny could be left unreconciled, and this strong approach accounting stuck with me – and I would like to think I pass this on to my team now.

Twenty people made partner at Withum:

“It’s my privilege to introduce Withum’s 2024 New Partner Class, said Pat Walsh, Managing Partner and CEO, in a press release. “We are celebrating these individuals for reaching a career milestone they have worked tirelessly toward. Each person on this list has exhibited a strong entrepreneurial spirit, dedication to their profession, and long-lasting grit that I am sure will propel them and our firm through many years of success. At Withum, our people are our greatest asset, and this new partner class is a testament to that belief. Congratulations to all of our new partners!”

You can see their names and service lines from Withum here.

Financial Times reminds us that today is Janet Truncale’s first day. Let’s wish her a good one.

On the business front, Janet Truncale becomes the new chair and chief executive of EY Global on Monday. She will be replacing Carmine Di Sibio who was the architect of the aborted Project Everest that tried to split the global firm’s accountancy and consulting arms. Another key participant in Project Everest was the head of EY’s UK operations Hywel Ball, who earlier this month announced his plans to step down.

I think that might be it for now. If you see something interesting, please pass it along! Comments, suggestions, complaints, and (my favorite) compliments are always welcome by email or you can text the tipline any time. Have a wonderful week!

The post Monday Morning Accounting News Brief: Offshoring Frustrations; Generative AI Generates Big Billable Hours | 7.1.24 appeared first on Going Concern.

Technology

AI-exposed sectors experience productivity surge as AI jobs climb and see up to 25% wage premium: PwC 2024 Global AI Jobs Barometer [PwC]
Sectors more exposed to AI are experiencing almost five times (4.8x) higher growth in labour productivity, according to PwC’s 2024 Global AI Jobs Barometer. The report, which analysed over half a billion job ads from 15 countries, suggests that AI could allow many nations to break out of persistent low productivity growth, generating economic development, higher wages, and enhanced living standards. The report finds that for every job posting requiring AI specialist skills (like machine learning) in 2012, there are now seven job postings. PwC research also finds that growth in jobs demanding AI skills has outpaced all jobs since 2016, with postings for jobs requiring AI skills growing 3.5x faster than for all jobs. The findings also highlight economic opportunity for labour forces: jobs that require AI skills carry up to a 25% average wage premium in some markets.

What does neuromorphic computing mean for business? [PwC]
Neuromorphic computer systems aim to mimic brain functions, with the ultimate goal of matching—or even surpassing—the capabilities of the human mind. This ranges from using software to model and process information in the way that living organisms do, through trying to match the brain’s (as yet) unbeaten combination of low power and high performance with the use of radical new hardware architectures, including novel components such as memristors (transistors that behave like neurons). “With the enormous potential of AI becoming more obvious by the day, one of the major concerns for the field is that flexible intelligence as we understand it actually maps onto binary computing very poorly, and is inefficient as a result,” explains Dina Brozzetti, a managing director in PwC US’s products and technology practice. “If AI could truly learn and evolve its understanding of the world without prior programming, just like us, but at the same low energy cost—a human brain uses only around the same energy as a 20-watt light bulb, to do calculations a supercomputer would struggle to perform—then it could be the most transformative watershed in computing since the switch from vacuum tubes to transistors.”

Only 28% of CFOs say AI is critical to financial transformation: report [CFO]
Despite challenges around labor and data, 38% of CFOs and 35% of accountants are optimistic about the future of AI in their roles. Alongside this, both groups appear hesitant about the practicality of AI making significant changes, whether positive or negative, to their work processes anytime soon.

Narrowing the workplace’s AI ‘trust gap’ [The CFO]
The lack of confidence and trust between employees and employers, known as the AI Trust Gap, is not surprising given the relative immaturity of GenAI and the exponential pace at which technology is evolving. The World Economic Forum (WEF) reported this year that only 55% of employees are confident their organization will ensure AI is implemented in a responsible and trustworthy way and 42% believe their company doesn’t have a clear understanding of which systems should be fully automated and which require human intervention.

Internal audit’s role in the new European Union’s Artificial Intelligence Act [Wolters Kluwer]
The European Union’s Artificial Intelligence (AI) Act is a landmark regulation that seeks to define and harmonize comprehensive rules for the development and use of AI systems across the EU. High-risk AI systems are subject to stringent requirements under the AI Act. Internal auditors must assess that robust risk management systems are in place. These systems should include processes for identifying, assessing, and mitigating risks associated with high-risk AI systems. The internal audit data that is used by AI systems is also important, so assessing the organization’s data governance structures and processes is essential. Auditors should verify that high-quality data is used, appropriate documentation is maintained, and applicable record-keeping practices are followed.

The democratization of deepfake technology brings new perils for business [Deloitte]
This is supposed to be a podcast but if you follow the Apple Podcast and Spotify links, Deloitte hasn’t updated the podcasts in months. So you’re gonna have to read it, sorry.
Deepfake technology has advanced rapidly, and bad actors have taken note. In February, a finance worker in Hong Kong was tricked into transferring approximately US$25 million to a fraudulent account after a video conference with his CFO and other coworkers he recognized. He later discovered that everyone on the call—except him—was a deepfake. Mike Bechtel, chief futurist of Deloitte Consulting LLP, said events like this have galvanized business leaders into considering their risk. He and his team had covered the risks of synthetic media just a few months before. Clients were interested, but not overly concerned, he said. But when the news from Hong Kong hit, “In short, this really turned from ‘Yikes; that would be a bummer if it happened,’ to ‘Yeek! This is happening and it better not happen to me!’”

People

Number of professionals at the leading accounting firms in the United States in 2023 [Statista]
With almost 140,000 professionals employed in 2023, Deloitte represented the largest accounting firm in the United States in terms of staff. In the same year, Ernst & Young (EY) came second in the list of accounting firms with the most professionals, where they employed less than half of the number of that of Deloitte.

EY promotes Christian Tinder to Seattle office leader [Puget Sound Business Journal]
“I’m honored to step into this leadership role with EY Seattle, a community that has been my professional home for 25 years,” Tinder said in a news release. “I look forward to developing our talented people and driving growth and innovation for clients.”

KPMG welcomes new partners [KPMG Australia]
The number of people promoted to partner at KPMG Australia is half the size of last year’s new partner cohort.
KPMG Australia CEO, Andrew Yates commented: “I’m delighted to welcome these talented individuals as partners and am particularly proud of their varied backgrounds and the depth of experience that they bring to our firm and clients.” 54% of new partners are women; 23% of the new partners also identified as culturally diverse. The Audit & Assurance division added 7 new partners, while Consulting added 21 partners across areas including Technology, Transformation, Customer & Operations and Risk Services units. Enterprise, the firms’ mid-market business, added 13 partners; Tax & Legal added 8 partners; Deal Advisory & Infrastructure appointed two partners while Business Services added one partner.

Talent

Attn: Accounting employers. This is your weekly reminder to sign up for Always-On Recruiting from Accountingfly to get a new batch of ready-to-hire candidates in your inbox every week with no obligation to hire. It’s free! Stop freaking out about all those articles about talent shortages and start finding the remote talent you’re looking for.

Here’s a sneak peek of just a couple remote accounting candidates available to hire now:

ACCOUNTING

FTE Accounting | Candidate ID #21919761

• Certifications: QBO ProAdvisor, Bill.com Certified
• Education: BA Economics in process
• Experience (years): 18+ years of accounting experience
• Work experience (detail): Currently with an outsourced accounting firm
• Prepares year end tax packages for the preparer
• Provides full cycle accounting for multiple clients
• Experience with tech startups, venture capital investment
• Client niches: SMBs, SaaS, Fintech, Tech, Retail, ecommerce, Services
• Tech Stack: QBO, Xero, NetSuite, Expensify, Divvy, Bricks, Power BI
• Remote Work Experience: Y
• Time Zone: Eastern
• Sign up to learn about this Candidate

FREELANCE / PROJECT TALENT

PT Freelance Tax and Accounting | Candidate ID #18295356

• Certifications: CPA, CFP, CFA
• Education: BS in Accountancy
• Experience (years): 20 years accounting experience
• 8+ in public accounting
• 10+ in global investment operations
• Fund accounting $100m – $3b
• Client niche: SMBs, C-Corp, LLCs, Real Estate, Partnerships, Investment funds
• Tech Stack: UltraTax, Lacerte, Drake
• Remote Work Experience:  Y
• Goal: Tax and accounting projects
• Time Zone: Central
• Sign up to learn about this Candidate

News

Global IPO divergence widens as Americas and EMEIA surge while Asia-Pacific slows. [EY]
Globally, in the first half (H1) of 2024, there were 551 listings raising US$52.2b in capital, a 12% decrease in the number of IPOs and a 16% drop in proceeds raised YOY. This result is mainly due to a slowdown in Asia-Pacific IPO activity with the Americas and Europe, the Middle East, India and Africa (EMEIA) seeing robust growth in H1. These and other findings are available in the EY Global IPO Trends Q2 2024, a quarterly report analyzing global IPO data to determine market trends and outlook for the year ahead.

World Bank Group Debars Ernst & Young LLP, Kenya [World Bank Group]
The World Bank Group (WBG) today announced the 30-month debarment of Kenya-based Ernst & Young LLP (EY Kenya), which provides various services including assurance, tax, consulting, advisory and information technology. The debarment is in connection with sanctionable practices as part of the Somali Core Economic Institutions and Opportunities Program (SCORE) and the Second Public Financial Management Capacity Strengthening Project (PFM II) in Somalia. SCORE was designed to improve the enabling environment for private and financial sector development and catalyze private investment and job creation. PFM II aimed to establish and strengthen systems of domestic revenue mobilization, expenditure control, and accountability in the Federal Government of Somalia, Puntland State of Somalia, and Somaliland State. According to the facts of the case, EY Kenya failed to disclose a conflict of interest during the selection and implementation of four contracts under the SCORE and PFM II projects, and the involvement of an agent in those contracts. In addition, during the execution of one of the contracts, EY Kenya made a provision for allowances to be paid to project officials. This conduct constitutes fraudulent and corrupt practices under the WBG Consultant Guidelines.

BDO Strengthens Audit Quality Commitment with Addition of Second Independent Member on Audit Quality Advisory Council [Business Wire]
BDO USA announced the addition of John Fiebig as the second independent member to its Audit Quality Advisory Council (AQAC). Established in 2022, BDO’s AQAC provides input on the firm’s system of quality management, directly advising BDO’s CEO and board of directors on audit quality matters. Also supporting its audit quality journey, the firm released its 2023 Audit Quality Report highlighting the significant and transformative actions and investments taken since 2022 that, together with previous efforts, are driving the consistent and sustainable delivery of high-quality audits into the future. BDO has made numerous investments to improve the quality of its audits over the past two years, including, among others, the deployment of a reimagined approach to learning, an enhanced approach to audit phasing, the implementation of a new methodology enablement group, the continued nationalization and standardization of its assurance practice, as well as the continued expansion of its digital audit suite. To learn more about these initiatives, see BDO’s 2023 Audit Quality Report.

KPMG earns 2024 Microsoft Partner of the Year recognitions [KPMG]
KPMG firms have received several 2024 Microsoft Partner of the Year Award recognitions, including Winner: Switzerland Partner of the Year, Finalist: Global Advisory Partner of the Year, Finalist: AI Innovation Partner of the Year, Finalist: Nonprofit Partner of the Year.

AI, accounting degrees coming to state universities [SDPD Radio]
Two new programs in the state university system aim to help tackle high-demand career needs in South Dakota. A bachelor’s-level program for accounting is coming to South Dakota State University, and a master’s program in artificial intelligence is approved for the University of South Dakota. SDSU currently offers a minor in accounting, but Rave said the new courses will further expand opportunities for students interested in the financial sector.

Survey Says

Global Workforce Hopes & Fears Survey 2024 [PwC]
Change is everywhere – and employees are feeling it. PwC’s 2024 Global Workforce Hopes & Fears Survey – the fifth in a series dating back to 2019 – found more than half of those workers say there’s too much change at work happening at once. In Australia, 54% don’t understand why things need to change at all. At the same time, workers also report increased workloads, uncertainty about job security, and pervasive financial struggles. Before you assume the picture is bleak, there are also strong signs of optimism and engagement. Most employees say they’re ready to adapt to new ways of working. Many are eager to upskill and see potential to use generative AI (GenAI) to increase their efficiency. More than half agree recent changes they’ve experienced make them feel optimistic about their company’s future. These mixed signals, based on a survey of more than 56,000 workers in 50 countries and territories, including 1,500 from Australia, suggest a workforce caught between today and tomorrow. Workers are open to the future, but present-day pressures may be clouding their vision of what it could look like and how they can contribute.

The post Friday Footnotes: The Number of Professionals at Each of the Biggest Firms; PwC Uses Big Words; AI, AI, AI | 6.28.24 appeared first on Going Concern.

The IRS has dropped an Employee Retention Credit update. Update: Hella people were scammin’.

Following a detailed review to protect taxpayers and small businesses, the Internal Revenue Service today announced plans to deny tens of thousands of improper high-risk Employee Retention Credit claims while starting a new round of processing lower-risk claims to help eligible taxpayers.

“The completion of this review provided the IRS with new insight into risky Employee Retention Credit activity and confirmed widespread concerns about a large number of improper claims,” said IRS Commissioner Danny Werfel. “We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims.”

“This is one of the most complex credits the IRS has administered, and we continue to ask taxpayers for patience as we unravel this complex process,” Werfel added. “Ultimately, this period will help us protect taxpayers against improper payouts that flooded the system and get checks to those truly eligible.”

The review involved months of digitizing information and analyzing data since last September to assess a group of more than 1 million Employee Retention Credit (ERC) claims representing more than $86 billion filed amid aggressive marketing last year.

During this process, the IRS identified between 10% and 20% of claims fall into what the agency has determined to be the highest-risk group, which show clear signs of being erroneous claims for the pandemic-era credit. Tens of thousands of these will be denied in the weeks ahead. This high-risk group includes filings with warning signals that clearly fall outside the guidelines established by Congress.

Earlier:

• The IRS Has Stopped Processing ERC Claims Because ERC Mills Are Scamming the F*ck Out of Them
• The IRS Is Ready to Strike the Fear of God Into Anyone Who Took ERC
• Tax Preparer Finds Out in the Worst Way Possible That ERC Wasn’t a Free Money Glitch

On June 14, Inc. published a story about ERC lawsuits:

These delays aren’t just hurting companies who sought them out, but also the tax advisory firms that have helped businesses fill out the necessary paperwork to obtain those credits with hopes of getting a piece of the pie as payment.

Such is the case for Jonathan Cardella, who runs Strike Tax, a tax advisory firm in Boise, Idaho. Cardella’s firm–which initially focused on advising businesses on how to tap into R&D tax credits–saw interest spike from businesses wanting to pursue the employee retention tax credit. Within a year, he says, ERCs went from a small portion of the business to a majority of it.

But Cardella claims that he’s missed out on $5 million in revenue he had banked on through uncollected fees, since businesses he advised have yet to receive their credit. As a result, Cardella says he has had to lay off 20 staff members. Cardella himself is unable to sue the IRS, since his business would not have directly received the tax credit. But that’s not stopping him from exploring legal action.

“We’re still hoping the IRS can do the right thing, but we’re sort of in a bit of limbo as we work to develop our first handful of plaintiffs,” he says. “As soon as I get my first client who has the chutzpah to do it, we’re going to file our first case.”

Fortune wrote about some troubles with Deloitte-managed state Medicaid services:

The systems have generated incorrect notices to Medicaid beneficiaries, sent their paperwork to the wrong addresses, and been frozen for hours at a time, according to findings in state audits, allegations and declarations in court documents, and interviews. It can take months to fix problems, according to court documents from a lawsuit in federal court in Tennessee, company documents, and state agencies. Meanwhile, America’s poorest residents pay the price.

Deloitte dominates this important slice of government business: Twenty-five states have awarded it eligibility systems contracts — with 53 million Medicaid enrollees in those states as of April 1, 2023, when the unwinding of pandemic protections began, according to the Centers for Medicare & Medicaid Services. Deloitte’s contracts are worth at least $5 billion, according to a KFF Health News review of government contracts, in which Deloitte commits to design, develop, implement, or operate state systems.

State officials work hand in glove with Deloitte behind closed doors to translate policy choices into computer code that forms the backbone of eligibility systems. When things go wrong, it can be difficult to know who’s at fault, according to attorneys, consumer advocates, and union workers. Sometimes it takes a lawsuit to pull back the curtain.

Australian telecom corp Telstra has broken up with EY after 25 years and hooked up with Deloitte. As to why…

Telstra, which revealed thousands of job cuts in late May to help it meet cost-cutting targets, confirmed on Monday it had chosen Deloitte to provide statutory auditing services from July. EY has audited Telstra’s books since 1999.

“After 25 years with EY, testing the market and choosing a new provider reflects our commitment to good governance. It will bring fresh perspectives and insights into our financial reporting processes,” a Telstra spokesman told The Australian Financial Review.

“With the rapid evolution of digital tools in the audit profession, we’ll also be exploring opportunities to improve our process and reduce our costs.”

…

Deloitte pitches “cloud-based, digital solutions” for auditing contracts, claiming it can reduce the time companies spend on manual tasks related to auditing.

Forvis Mazars has appointed two new audit and assurance partners in Switzerland. If anyone needs some free karma on r/justfuckmyshitup, have at it.

Raconteur profiled OnlyFans CFO Lee Taylor:

It was the desire to hold “an influential position at an interesting company” that led Lee Taylor to accept a job as chief financial officer at OnlyFans back in 2019.

…

Taylor’s path to the C-suite was unconventional. He ditched university at age 17 to pursue an accountancy apprenticeship. “My preference has always been to learn by doing,” he says. This early practical experience provided the opportunity to “learn by osmosis” and exposed him to how the finance function actually works within a business.

It also helped to shape his approach as his career progressed. “I’m always trying to view finance through all the different lenses within an organisation,” he adds.

Unsurprisingly, Taylor rejects the idea that one needs a university degree to enter the C-suite.

Indeed, an aversion to following the herd was in part what prompted him to leave his safe and predictable senior finance role at a listed company and accept an executive position at OnlyFans.

Related?

The new-ish CFO of the city of Columbus, Mississippi had to explain how audits work and why this mess isn’t his problem:

“Not good” and “not acceptable” are how Columbus Chief Financial Officer Jim Brigham describes the state of internal controls reflected in the city’s audit for Fiscal Year 2021.

“This does portray the status of internal controls in 2020, at the end of Fiscal Year 2021. And, you know what? It’s not good. It’s not acceptable. We don’t accept it, but I want to tell you also, that these things happened because you have to put people – these are technical issues – And, you have to put the right people in position to take care of it, and to babysit it, and to make sure it’s right, and that you can trust. And, some of it is trust, and some of it is compliance, and that’s why we have auditors come in and check our trust,” said Brigham.

Brigham was hired on in March 2022 and makes $100k a year. His predecessor was arrested for embezzlement.

And Vance County, North Carolina is learning the importance of internal controls:

The FBI is investigating the financial dealings of Vance County’s former finance director. County manager Renee Perry confirmed the investigation to WRAL.

Katherine Bigelow was terminated in February after Perry said she misrepresented her qualifications as a CPA, or certified public accountant.

A financial audit found that Bigelow wired more than one million dollars of county funds to a company that she was affiliated with.

“This action was able to go undetected for the time that it did due to a lack of understanding by the staff of the County in their assigned duties, and no cross-training of individuals who would have been able to provide oversight on the transactions,” said Thompson, Price, Scott, and Adams & Company auditors in their report.

“We finally started digging into why we weren’t getting the numbers we wanted…and the timeliness of the numbers…and the accuracy of the numbers. We began to dig into why weren’t the numbers reconciled, why weren’t they timely…which led to our discovery,” said the auditor at a Board of Commissioners meeting. “Our folks started going, ‘The answers she’s giving us are not what somebody in her position should be giving us.’”

Bigelow was fired in February.

A news outlet in Ghana discusses a 24/7 Big 4 busy season and witchcraft in the same article:

Two of Ghana’s biggest issues currently affecting progress are joblessness/unemployment and witchcraft (both foreign and local).

…

Anybody who has ever interned, worked or passed-through any of these accountancy firms would easily recognize the concept of a ’24 Hour Economy.’ In Ghana’s quest to solve the unemployment problem which is the single most depressing problem threatening to derail an entire generation of young adults and upending many families, the 24hr work cycle if successfully introduced and implemented would indeed be a game changer.

In principle, this concept which already exists in some industries like healthcare would be spread to other industries including Finance and Accountancy in the country just like their counterparts beyond the shores of Ghana have been running for decades.

Busy seasons, which could run anywhere from 6months to 9months for some and an entire 12months for others, is a period in the yearly life of a Big 4 employee where work never stops. In short, different people work at different times (shifts) continuously in a 24hr timeframe throughout the lifetime of a project. This is a period of tremendous hiring for many firms since as much hands as possible are needed to complete assignments. The burn out rate is so high during this period for various interns, independent contractors and consultants that compensation is exceptionally high. Some interns and consultants who make it through this period would get full time positions while others who may not necessarily enjoy the year-round experience of such tremendous workload would much prefer to be yearly seasonal hires using the time in between hires to either cool off or pursue other interest.

OK that’s it. As always, please get in touch if you have a tip or have seen a story you think the audience would find interesting. If email isn’t your thing, text the tipline (anonymously) at 202-505-8885 or hit us up on Twitter.

The post Monday Morning Accounting News Brief: Billions of ERC Claims Denied; On the OnlyFans Career Track; 24-Hour Busy Season?? | 6.24.24 appeared first on Going Concern.

ICYMI

Here are the five most-read stories on Going Concern this week:

• The Era of the Non-Equity Partner Is Upon Us
• Layoff Watch ’24: KPMG Australia Throws Out Babies and Bath Water in Consulting
• Deloitte Survey: Management Thinks Everyone Is Doing Way Better Than They Actually Are
• As Prophesied, the IRS Is Struggling to Hire All Those New Agents
• AI’s Hype Phase is Dying and Fast

DEI

Companies Are Watering Down Their Diversity Recruiting Programs [Wall Street Journal]
White-collar companies that once championed programs to recruit diverse employees are now tiptoeing away from them. PricewaterhouseCoopers and JPMorgan Chase JPM 1.04%increase; green up pointing triangle are among those that recently removed or altered descriptions of their programs for underrepresented students. The shift came after an “anti-woke” movement took aim at U.S. companies and a Supreme Court decision overturned affirmative action in college admissions.

Deloitte named a Top 50 Employer for Gender Equality [Deloitte]
Deloitte UK has today been named in The Times Top 50 Employers for Gender Equality list for the ninth year running. Deloitte in the UK continues to remain committed to offering our people flexibility in where and how they choose to work and our approach to hybrid working is an important part of how we support our people. We have expanded our Future Leaders Programme, launched in June 2022, to 1,000 people, aiming to improve the representation of women and underrepresented ethnic groups at all levels of our firm. This year’s Deloitte UK partner promotions saw 27 (33%) women being promoted, increasing the total number of Deloitte’s women partners to 412 (30%).

Big 4

KPMG to cut further 200 UK jobs amid market slowdown [Financial Times]
The accounting and consulting business told staff on Thursday that it would axe about 200 back-office and client-facing roles following a review of its cost base, according to people familiar with the matter. As part of the restructuring, KPMG will merge certain back-office functions and “reduce duplication” in parts of its client-facing operations, the people said. The firm declined to comment on which client-facing business lines would be affected.

Local PwC managing partner on how firm is stepping up philanthropic work in Charlotte [Charlotte Business Journal] PwC has leaned in more towards the Mayor’s Racial Equity Initiative, a $250 million public-private venture focused on upward mobility through a range of jobs, technology, neighborhood and educational initiatives. The professional services firm’s engagement with that commitment focuses on bridging the digital divide, Charlotte office MP Emily Pillars said. PwC has pledged $1 million in funding and another $1 million toward pro bono services for the equity initiative. “The funding goes towards providing electronic devices, computers and laptops to underserved communities within the Mayor’s Racial Equity Initiative geography,” Pillars said.

National accounting firm names new Baltimore office head [Baltimore Business Journal]
Baltimore native Mary Kate Federico will lead Ernst & Young LLP’s Baltimore office starting July 1. Federico will replace Arun Subhas, who has run the Baltimore office since 2019. Subhas will continue to work at EY’s local office but was selected to serve as lead tax partner for one of the firm’s multinational clients. Federico will manage EY’s 250-person office, which ranks among the largest accounting firms in Greater Baltimore.

Surveying a Shifting Landscape: The Big Four and the Rising Tide of Advisory Services [CPA Journal]
Around the turn of the century, the largest public accounting firms featured fast-growing advisory services divisions. Tension within these firms, and stricter regulations in the form of the Sarbanes-Oxley Act (SOX), led to divestitures and significant changes in firms’ mix of revenues. The landscape has again shifted, as advisory services have once again expanded and, in some cases, eclipsed traditional assurance work. This article illustrates these trends, describes the contemporary reaction from selected global regulators, and ponders the potential impact on the audit profession.

Technology

AI hallucinations: what business leaders should know [PwC]
If your company is like most, generative AI (GenAI) is already at work. Probably, you’ve stood up a few use cases. Maybe (as we have done at PwC) you’ve already scaled up some. And, most likely, your enterprise software now has embedded GenAI capabilities, which your people are using every day. But as GenAI becomes more critical to daily operations, a common question persists: Can I trust it? Trust in GenAI requires all the traditional drivers of trust in tech: governance, security, compliance and privacy. As with traditional AI, you also need to mitigate bias. But GenAI also adds a new risk, “hallucinations” — outputs that seem plausible but have no basis in reality. Traditional AI sometimes hallucinates too, but more rarely, and it’s usually operated by specialists who can catch these errors. With GenAI, hallucinations can — in some specific instances — pose a risk, especially for GenAI users who don’t have deep AI experience.

Practice

Accounting Guidance for ESG Projects & AI Usage in Auditing [Resourceful Finance Pro]
In a matter of months, companies will possess first-ever guidelines for environmental credit accounting. Public and private firms will be required to follow one model for marking down projects like carbon dioxide offsets. The Financial Accounting Standards Board (FASB) unanimously approved Accounting for Environmental Credit Programs (AECP) on June 17. FASB started working on AECP in 2022, at least in part, to rectify widespread “greenwashing” done by corporations, particularly in the oil & natural gas sector.

The P Word

The Allure of Law Firms for Private Equity [The Deal]
Recent investments by sponsors in accounting firms suggest PE would find attractive targets in the legal profession if more state bar associations allow nonlawyers to own stakes in law firms.

Audit

Trump Media Auditor’s Shutdown Strands Nearly 40% of Ex-Clients [Bloomberg Tax]
The approximately 70 former BF Borgers clients that remain in auditor search mode range from Nasdaq-listed Japanese luxury real estate developer Lead Real Estate Co. to aspiring hoverboard seller MoveIX Inc., traded on the pink sheets, according to a Bloomberg Tax review of securities filings. Costs are an obstacle for some of the smaller former Borgers clients. Others have faced pushback from potential new auditors leery about starting financial checks from scratch, ex-Borgers clients told Bloomberg Tax.

Global Audit Quality Report: a commitment to continuous improvement [EY Global] The full report can be downloaded at that link.
Stakeholders need confidence in the capital markets to make important decisions that drive economic growth. Auditors can help build this confidence through their proven ability to validate and interpret data objectively and independently, before providing the appropriate level of challenge. In this way, audit quality plays a crucial role in creating long-term value for all stakeholders.

Tangentially Related

How Much The Winning Caddie Makes At The 2024 KPMG Women’s PGA Championship [Golf Monthly]
The KPMG Women’s PGA Championship prize money has increased at an extraordinary rate over the past few years, with over $10 million on offer in 2024 compared to $4.5 million in 2021. For many years before that, there was much more of a gradual increase in the total prize pot, having only reached seven figures for the first time in 1990. While the payout figure has generally climbed over the years, it did also briefly fall in 2013 before a 50% jump to $3.5 million in 2015.

Talent

Accounting Firms in OC Report 3% Growth in Employees [Orange County Business Journal]
Of the 47 accounting firms surveyed by the Business Journal, the number of OC employees rose nearly 3% to 6,727 last month from the year earlier, while the number of local CPAs increased less than 1% to 2,003. Local accounting firms showed a third year of growth. Deloitte, a Big Four stalwart, kept its usual No. 1 ranking though the number of employees in its Costa Mesa office dipped slightly to 1,081 from 1,097 a year ago. The CPA ranks increased 7% to 238. Global giant Ernst & Young in Irvine held on to second place by local headcount while PwC moved one notch to No. 3. The largest OC-based accounting firm was Irvine’s Omega Accounting Solutions, whose headcount stayed steady at an estimated 187.

If you’re in the market for the best talent on the block and you’re one of those smart firms that embraces remote work, check out Accountingfly’s top remote accounting candidates of the week! And sign up for Always-On Recruiting to get a fresh batch of tax professionals, auditors, and accountants in your inbox every week with no obligation to hire. It’s like window shopping but for people. Wait, that sounds kind of creepy.

Here’s a sampling of this week’s candidates to save you a click:

FTE Tax Manager | Candidate ID #21914340

• Certifications: CPA
• Education: BS Accounting
• Experience (years): 10 years accounting and tax experience
• Work experience: 9+ years in public accounting
• 4+ years as Tax Manager
• Led a team of 7
• Preparation and review of tax returns
• Tax planning and advisory services
• Client niches: SMBs, Healthcare, Services
• Tech Stack: QBDT / QBO, Xero, Lacerte, UltraTax, Axcess, ProSystem fx, Engagement, SageFAS Fixed Assets
• Remote Work Experience: Y
• Goal:  Professional growth, work life balance, new challenges
• Salary: $115k
• Time Zone: Eastern
• Sign up to learn about this Candidate

PT Freelance Tax and Accounting | Candidate ID# F20590940

• Certifications: Enrolled Agent
• Education: BS Accounting
• Experience (years): 15+ years accounting experience
• Work Experience:  15+ in public accounting
• Own practice for 7+ years
• Outsourced full cycle accounting and financial reporting
• 14+ years Federal, State and Local tax preparation
• Client Niches: SMBs, Retail, Services
• Tech Stack: QuickBooks
• Remote Work Experience: Y
• Goal: Contract tax engagements, project or hourly based
• Time Zone: Eastern
• Sign up to learn about this Candidate

FTE Tax and Accounting Senior | Candidate ID #20385321

• Certifications: QBO ProAdvisor, CPA in process
• Education: BBA Accounting
• Experience (years): 6+ years of tax and accounting experience
• Work experience: 4+ years with a CPA firm
• 400+ returns prepared in 2023, 60% business and 40% individual returns
• Full service accounting experience
• Client-facing experience
• Client niches: Local government, Construction, Manufacturing, Services
• Tech Stack: QBDT / QBO, CCH, Xero, Bill.com, Expensify, Shopify
• Remote Work Experience: Y
• Goal: Seeking a remote tax and accounting opportunity with professional growth
• Time Zone: Eastern
• Sign up to learn about this Candidate

It’s time to rethink what it means to be an accountant [AccountancyAge]
When we think of an accountant, the image that often comes to mind is one of a stuffy, dull professional, hunched over a desk crunching numbers all day. It’s a perception that has long plagued the accounting industry, making it challenging to attract the next generation of talent and clients. But the reality is that accounting has evolved significantly, with accountants now playing a vital role in driving business growth and innovation. The accounting profession has undoubtedly undergone a transformation, with advancements in technology, the increasing demand for advisory services, and the growing emphasis on sustainability and social responsibility. Yet, the outdated stereotypes persist, and it’s time for the industry to take a proactive approach to redefining what it means to be an accountant.

The post Friday Footnotes: More Layoffs at KPMG; PwC Offers AI for Dummies; DEI Initiatives are MIA | 6.21.24 appeared first on Going Concern.

And now, news that’s news as of today.

This morning, the IRS announced new steps to combat abusive use of partnerships:

As part of ongoing efforts to focus more attention on high-income compliance issues, the Internal Revenue Service announced today a new series of steps to combat abusive partnership transactions that allow wealthy taxpayers to avoid paying what they owe.

IRS compliance work continues to accelerate in this complex area of law following Inflation Reduction Act funding. As part of this, the agency is announcing a new dedicated group in the Office of Chief Counsel specifically focused on developing guidance on partnerships, including closing loopholes. The office will work closely with a new pass-through work group being established in the IRS Large Business and International division that will be formally established this fall.

The IRS and the Department of the Treasury today also issued three pieces of guidance focused on partnerships following discoveries by IRS audit teams. Currently, the IRS has tens of billions of dollars of deductions claimed in these transactions under audit.

The new guidance is designed to stop the use of “basis shifting” transactions that use related-party partnerships to avoid taxes. In these complex moves, high-income taxpayers and corporations strip basis from assets they own where the basis is not generating tax benefits and then move the basis to assets they own where it will generate tax benefits without causing any meaningful change to the economics of their businesses. These basis shifting transactions allow closely related parties to avoid taxes.

Treasury estimates these abusive transactions, which cut across a wide variety of industries and individuals, could potentially cost taxpayers more than $50 billion over a 10-year period.

ProPublica did a story on “how remote work and artificial intelligence are ushering in new kinds of fraud in state and local governments” and interviewed Washington state auditor Brandi Pritchard. Municipal collapse, LET’S GO:

What’s the most shocking fraud you’ve ever run across?

Pierce County Housing Authority comes to mind. As far as we can tell, it’s the largest government misappropriation [by an employee] in Washington state’s history. And considering who the users of that particular district are, low-income folks needing housing assistance, that makes it even more staggering.

But on the fraud-nerdy side of things, it’s a wonderful case study. The way our auditor used professional skepticism was absolutely magnificent, in that she wasn’t just paying attention to the physical pieces of paper in front of her. She was capturing the environment, the culture there, and it felt off to her. The way our subject treated her staff compared to the way she treated the auditors felt off. So by the time the auditor looked at that bank statement and saw that weird wire to some title company, she was on high alert.

The Montgomery Advertiser of Alabama profiled an accountant stimulating her community both economically and charitably:

When Melissa Wood, accountant and entrepreneur, opened her accounting firm in Elba nine years ago she didn’t realize how much she would add to the town she describes as a close and genuine community.

More recently, Wood began an effort to help foster families in Elba and surrounding areas as she saw an unmet need. A relationship she developed with a foster parent and child opened her eyes to the need for support that foster families have for items like clothes, food, bedding and school supplies.

To answer that need she founded Fostering Angels. She applied for non-profit status in January, with the official ribbon-cutting held on May 18 in the former Bradley Florist space at 1951 Hickman Ave.

“We have already serviced 35-40 kids in the short time that we have been open,” Wood said.

And for an accountant allegedly behaving badly, let’s head to Thailand:

A woman accountant in Phuket has been apprehended by officers from the Central Investigation Bureau (CIB) on charges linked to multiple call centre scams. Identified only as Kanraya, the alleged scammer has been implicated in five separate arrest warrants for her involvement in fraudulent activities, including opening bank accounts used by scam gangs.

The investigation revealed that Kanraya used her bank account to receive money obtained through various fraudulent schemes. These included impersonating a police officer, deceiving victims into transferring money for verification, and tricking people into investing in online product sales with promises of high returns.

Kanraya denies the allegations.

Karen, you will never work in this town again! Compliance Week on a CFO behaving badly:

The SEC received a final judgment Friday in its case against former Synchronoss Technologies CFO Karen Rosenberger, filed in U.S. District Court for the Southern District of New York, the agency said in an administrative proceeding.

The details: In its complaint, the SEC alleged that Rosenberger engaged in accounting misconduct which overstated Synchronoss’ revenue in false financial statements, which allowed the company to meet revenue expectations it otherwise would not have met. The false statements related to five total transactions, including two with one of the company’s largest customers, and another related to Synchronoss’ acquisition of another company, the SEC said.

Per the SEC, she also “sought to cover up her and Synchronoss’s misconduct by lying to Synchronoss’s auditor in connection with those transactions, falsifying books and records, and by failing to implement or maintain, and circumventing, Synchronoss’s system of accounting controls.”

Two EY partners, Alison G. Yablonowitz, CPA and Shawn C. Rogers, CPA, were hand-slapped, browbeaten, and pilloried by the PCAOB in 2021 for their work on this client. Yablonowitz was engagement partner on the 2014 and 2015 audits of Synchronoss, Rogers stepped up to bat in 2016. According to the PCAOB order [PDF], Synchronoss said “trust me, bro” and EY was like “OK.”

In each of the transactions, Synchronoss licensed software technology to an entity—in exchange for a license fee—around the same time it was negotiating a strategic transaction (i.e., an acquisition, business venture, or divestiture) with that same entity or one or more of its affiliates. In each instance, Synchronoss incorrectly accounted for the license transaction as separate from the strategic transaction and improperly recognized the license payment as revenue.

With respect to these transactions, Respondents failed to adequately evaluate (a) Synchronoss’s accounting treatment of the license transaction as separate from the related strategic transaction and (b) the factors specified in the PCAOB’s fraud consideration standard with respect to significant unusual transactions. Moreover, Respondents failed to adequately resolve inconsistencies in audit evidence and investigate instances in which evidence contradicted management representations, and instead relied on uncorroborated management representations. In doing so, Respondents failed, among other things, to exercise due care and professional skepticism, and to obtain sufficient appropriate audit evidence to support EY’s audit opinions for the 2014-2016 Audits.

Forvis Mazars’ Phil Laminack talks about Pillar Two accounting for Bloomberg Tax:

As countries around the world adopt legislation to implement the 15% global minimum tax known as Pillar Two, tax accounting will become even more complex.

A country’s legislation will greatly affect multinational companies and pose numerous pitfalls based on sheer complexity and volume. Proactive planning and analysis will avoid problems down the road.

He gives some advice after that. Obviously.

Deloitte Australia is rolling out a new AI tool that supposedly makes working there more tolerable.

The news: Deloitte Australia will begin rolling out its new artificial intelligence platform MyAssist across its workforce after more than a year of development, as part of its strategy to become an “AI-fueled organisation”.

The numbers: The audit and consulting group will roll out MyAssist to its entire workforce of 13,000 from Monday.

Deloitte said that a trial of around 1,300 users found that a core set of common tasks can account for up to 50% of the work time of some users, and it is these tasks that the MyAssist platform has been optimised to support. As part of this trial, 70% of users reported the new platform “meaningfully improved” overall work productivity and 65% reported an improvement in work quality.

Meanwhile, Aussie KPMG did their own AI rollout to tax staff:

The firm describes [custom-built] KymTax as a combination of a research tool, knowledge management platform and content generator, designed to put the full breadth of KPMG’s proprietary tax knowledge at the easy reach of its practitioners.

The idea was conceived during an internal brainstorming challenge which aimed to uncover the most appropriate generative AI use cases within the firm, and is believed to be one of the first such applications globally for tax services.

And KPMG Canada is “expanding use of AI to boost efficiency and productivity“:

KPMG Canada says it has been investing in generative artificial intelligence (GenAI) proprietary tools, training, and solutions to enhance the work of its 10,000 professionals.

“At KPMG in Canada we’ve been experimenting, piloting, and implementing AI across the firm for some time,” Stephanie Terrill, AI executive leader and head of the management consulting practice, said in a press release on Wednesday. “And in some ways, we consider ourselves ‘client zero,’ which means we’re testing and piloting new generative AI solutions and sharing that expertise with clients by helping them implement their own AI solutions to solve a variety of business problems. It’s an exciting time to be innovating internally and with clients.”

ALM Treasury & Risk offers some advice for controllers who don’t want to get in trouble for bad financial statements:

Almost six out of every 10 accountants report making several errors every month, and one out of three says they make a few errors each week. These alarming statistics come from a July 2023 survey of 497 accountants conducted by Gartner research. The survey also found that the error rate among accountants is highly correlated with the extent to which their controllers report capacity constraints.

Obviously, financial errors can have tangible business consequences. If errors make their way into the monthly or quarterly close, business decisions may be based on incorrect data. Worse, the organization may issue inaccurate financial statements, opening itself up to an array of potential regulatory and investor relations challenges down the road.

Corporate controllers frequently seek to increase capacity by deploying new technologies in hopes of reducing errors. But so far, this approach has had mixed results. Many controllers have told us that their staff keeps doing manual work long after it is no longer needed.

INSIDE Public Accounting talks about firms embracing non-equity partnerships. “A win-win for talent and growth,” they said.

The accounting profession is adding far more nonequity partners to its ranks than equity partners, which means power is concentrated among fewer owners but stand-out pros are getting the opportunity for more responsibility, more autonomy and more money.

It’s a trend that’s remained solid for at least the last 15 years. According to the 2023 IPA Practice Management Survey, the number of nonequity partners among the IPA 100 (excluding the Big 4) has increased by more than 320% over the last 15 years versus just 85% for equity partners. The IPA 100 in 2023 included firms above $48.8 million in net revenue. The data also shows the practice has accelerated over the last five years.

The only thing holding back some “phenomenal” performers from becoming directors was business development experience. There’s room for both. “If we can get an outstanding business developer surrounded by people who can help them on the delivery front, make them more efficient and free up time for them to go out and make it rain even more, then that’s a really good answer for the firm.”

A Georgia accounting firm will be raising money to fund childhood cancer research this week:

The BRD Valdosta staff will run a lemonade stand for charity on Tuesday and Wednesday.

Stop by the office at 3006 N. Patterson St. from 11 a.m. to 2 p.m. each day to get a glass of lemonade for a donation to Alex’s Lemonade Stand Foundation for Childhood Cancer.

“Working at an old-school lemonade stand is a fun way to raise money for a worthy cause,” said CPA Janine Pendleton, the BRD branch manager. “Besides, it’s hot outside, and who doesn’t love lemonade?”

Alex’s Lemonade Stand says it is the largest independent childhood cancer charity in the U.S. and has raised more than $300 million since 2005.

Two firms in Pennsylvania you’ve never heard of have merged:

RKL LLP continues its expansion with a merger with Lancaster-based Kauffman CPA Company, effective July 1.

RKL said in a release the merger will add further expertise to RKL Virtual Management Solutions’ spectrum of outsourced accounting, financial management, human resources and payroll services.

Approximately 15 Kauffman CPA Company team members, including Doug Kauffman and other key leaders, will join RKL’s nationwide team of over 650 professionals and will be based out of the Lancaster office

That was a surprising amount of news for a Monday in June! Always nice so I don’t have to work too hard.

Comments are off by default on news briefs but give me a shout if you have a comment, see something interesting, have a tip for us, or just need to vent: email | text. Find us on Twitter here. Oh and subscribe to the newsletter for the Accounting News Roundup by email every Tuesday and Friday. Byyyyeee.

The post Monday Morning Accounting News Brief: Heads Up, the IRS Is Scrutinizing Partnerships; | 6.17.24 appeared first on Going Concern.

The weekend discussion was about tight-ass firms in Madison offering $15/hr. nO oNe WaNtS tO wOrK!

Cheap firms aren’t news though. Here’s some actual news.

Financial Times dropped a bomb the other day: PwC asks for silence from departing staff in program of UK job cuts

PwC has launched a round of “silent lay-offs” in the UK, with affected staff told they must not inform colleagues why they are leaving and have to follow a “suggested wording” if they want to send goodbye messages.

In guidance sent to affected employees, reviewed by the FT, PwC said: “Should you decide to accept this voluntary offer, it is possible for you to send out a note to a defined group, however this must not refer to the voluntary severance offer or the circumstances of leaving (suggested wording for this note is given below but we recognise that you will naturally want to personalise this).

“Naturally, it must also not be derogatory to PwC or its employees/partners. It is down to business discretion as to when this message can be sent out and if the business wishes to review messages before they are sent out.”

The balls on this firm!

If it makes you feel any better, they’re still getting shit on by the Australian press. Here’s Sydney Morning Herald:

The tax office brawl that almost ended investigation of PwC scandal

The Senate committee that uncovered the PwC tax scandal is due to release its final report this Wednesday, but it will not end the fallout that has already torn the consulting firm in two and sent shockwaves throughout the entire industry.

The tax office now faces fresh scrutiny over allegations it actively attempted to derail the investigation that led to former PwC partner Peter Collins being banned in 2022 for sharing sensitive government tax plans with other partners and potential clients.

The scale of the scandal was revealed in May last year when the Senate committee released a cache of emails revealing the brazen attempt to use confidential government tax plans to cultivate fresh business from notorious corporate tax avoiders like Google and Facebook. This was triggered by queries from Senator Deborah O’Neill.

Fresh concerns were raised last month when government agencies, including the Australian Tax Office (ATO), replied to questions on notice from Senator Barbara Pocock.

It confirmed there was a barrage of actions targeting the Tax Practitioners Board (TPB) and its chief executive, Michael O’Neill, which discovered the damning evidence that was made public via the Senate committee.

Here’s something from the tip box:

Hearing about delayed start dates at BDO

— Going Concern (@going_concern) June 7, 2024

Last year around this time: Rise Up! BDO USA Is Gonna Double Its Offshore Workforce, Mostly in India

If you have more info, please text or email (tipsters are always anonymous).

Another auditor just gives up on a municipal-adjacent client. This one is Central Basin Water District which serves the southern part of Los Angeles County. They’ve been having some…issues.

An accounting firm hired to audit Central Basin Municipal Water District’s fiscal records threw in the towel last week, claiming it could not finish the job because missing records and “ongoing mismanagement” had undermined the review’s integrity.

In a June 3 resignation letter, Managing Partner Sanwar Harshwal stated auditors “encountered significant internal control deficiencies that demand immediate attention.”

“We have dedicated our efforts to rectify these deficiencies, but their persistence raises significant concerns regarding the reliability and accuracy of the financial information provided to us,” Managing Partner Sanwar Harshwal wrote. “Additionally, the challenges associated with incomplete and insufficient information have obstructed our ability to conduct a thorough and comprehensive audit.”

See also this April 2023 Los Angeles Times piece: ‘Take a seat, bro’; Embattled water agency muzzled critic at public meeting, ACLU says

Meanwhile, in Columbus, Missouri:

The city of Columbus’ delayed audit report for Fiscal Year 2021 is on its way, and the FY2022 report is expected by September.

During the city council’s Tuesday meeting, Accountant Wanda Holley with Watkins, Ward and Stafford – an outside accounting firm that is preparing the city’s audits – told the council the FY2021 report should be ready by the council’s June 18 meeting.

Meanwhile, Chief Financial Officer Jim Brigham said the firm is finishing collecting documents from the city for FY2022 by the end of the month. Brigham said the 2022 report should be available by the end of this fiscal year.

Brigham said the delays in the annual audits were caused by a few things, including previous embezzlement and weak bookkeeping.

In 2020, former city CFO Milton Rawle was arrested on charges of embezzling $288,000 from the city between 2016 to 2018. The missing funds were revealed by the FY2018 audit report.

I’m going to repeat something I’ve been saying for like a year and a half now: there is a big shitstorm brewing in municipalities of all sizes and we are not prepared. A lot of them blame Covid (or the client: EY Gave a Hilarious Excuse For Walking Away From This Awful Municipal Audit Client) but when you put aside the usual government inefficiency, poor bookkeeping, and embezzling, what you have is solid evidence that the accountant shortage is eating away cities from the inside.

It’s going to get much worse.

Deloitte is getting hyped about the Olympics and the International Olympic Committee wrote about it.

What do you think Deloitte can bring to the Olympic Movement?

John Skowron Deloitte’s Vice-Chair for the Olympic and Paralympic Games: “When I think of the IOC’s mission of building a better world through sport, I think about all that that entails. It’s a force for good. It’s a force for inclusion. It’s a force for gender equality in sports. Those characteristics align well to our firm and Deloitte. Being able to bring our capabilities to the Olympic Movement to help support that mission is very exciting to us.”

A video:

EY has appointed a new global Independent Non-Executive and he’s a PCAOB alum.

Today EY announced the appointment of a new EY Global Independent Non-Executive (INE), Duane M. DesParte, who will join the EY Global Governance Council (GGC), effective 1 June 2024.

Duane is a former Board Member of the Public Company Accounting Oversight Board (PCAOB), to which he was appointed by the Securities and Exchange Commission in December 2017, and on which he served through the conclusion of his second term in October 2023. He served as Acting Chair of the PCAOB from June 2021 to January 2022. While at the PCAOB, Duane served as an Officer of the International Forum of Independent Audit Regulators (IFIAR) for four years, including a term as Chair that ended in April 2023.

The GGC advises the EY Global Executive on policies, strategies, and the public interest aspects of its decision-making. The participation of INEs on the GGC plays an essential role in providing diverse perspectives in order to enhance the EY contribution to the stability of capital markets through audit and other services.

KPMG Canada offers ‘The CEO’s guide to AI strategy‘:

CEOs should keep in mind that generative AI isn’t just about personal productivity—such as drafting emails and creating presentations—though that’s where it gets the most attention. Productivity with AI is also about identifying efficiencies for core businesses operations, like machinery, equipment, systems, and resources. In other words, it’s not just about the productivity of people, but the productivity of an organization’s other assets across the entire value chain.

For example, an insurance company might build generative AI into claims processing to reduce fraud, while a manufacturer might use generative AI-enhanced predictive maintenance to boost the life span of equipment and reduce unplanned downtime. At KPMG, we’re building generative AI into our audit methodology to further de-risk audits—such as performing automated matching of cash to revenue using data from client accounting systems—which enhances our overall productivity.

Federal News Network talks about what House GOP is up to:

House Republicans are proposing defunding the IRS’ Direct File platform, which allows households to file their federal tax returns online and for free.

But the House Appropriations Committee released a fiscal 2025 spending bill this week that would cut IRS funding by nearly 18% and zero out funding for Direct File.

The FY 2025 fiscal services and general government appropriations bill would give the IRS a $10.11 billion budget — a $2.2 billion cut from current spending levels. The cuts would be felt mostly by IRS enforcement, which would see a $2 billion cut in funding.

Earlier: The IRS Says F*** You to TurboTax and Makes Direct File a Forever Thing

Looks like that’s all I’ve got for now. As always, I implore you to get in touch if you spot something newsworthy, have inside scoop, or just want to gripe. I don’t mind. Email me directly or hit the tipline at 202-505-8885.

Have a great week, you.

The post Monday Morning Accounting News Brief: PwC Does Something Exceptionally Grimy; PCAOB Alum Heads to EY | 6.10.24 appeared first on Going Concern.

ICYMI here are the five most-read stories on Going Concern this week

• Here’s How Mid-Tier Accounting Firms Are Feeling About the Talent Crisis and Remote Work
• Deloitte’s Growing Its Disease Business
• Forvis and Mazars Consummate Their Union with a Postnuptial Jerk Off
• Yo, Where Are the Rainbows?
• Forbes Launches Westminster Dog Show But for CPAs

Drama Down Under

‘EY have modelled it’: Emails reveal advice that cost client $50m [Financial Review]
In 2014, Billabong founder Gordon Merchant wanted to sell his bioplastics business. He also wanted to make sure he didn’t pay much tax. Now the advice he took from EY has led to a $50m tax bill.

PwC to face scrutiny over advice to clients that might allegedly ‘mislead or subvert’ foreign investment review board [The Guardian]
The Greens senator Barbara Pocock has warned consultancy PwC Australia faces fresh scrutiny after the Australian Taxation Office revealed it had queried advice given to clients that might “mislead or subvert” foreign investment review board processes. The details were revealed in answers to questions Pocock put to the ATO about a meeting between the office commissioner Jeremy Hirschhorn and the then PwC chief executive, Luke Sayers, in August 2019. At that meeting, Hirschhorn “advised” Sayers about concerns with PwC’s tax practice. These had followed a 2015 tax scandal that prompted regulators to bar PwC’s Peter Collins from advising for eight years after he was accused of sharing confidential government information about multinational tax avoidance with his colleagues.

Anyone seen $6 million lying around?

It’d be easier to read a novel that’s been passed through a shredder than access info on what some private consultants do with taxpayer money.#auspol #senate pic.twitter.com/KpYRmI3lIu

— Barbara Pocock (@BarbaraPocock) June 6, 2024

Audit

How to build a team of ‘appropriately skeptical’ financial statement auditors [Phys.org]
A new study identifies the characteristics that make auditing professionals more likely to reward skepticism in the people they supervise, which is associated with an increased likelihood of identifying potential fraud during the auditing process. One key takeaway is that encouraging appropriate skepticism in auditors is closely tied to the culture of the workplace, offering valuable insights to firms that want to encourage rigorous audits. “Auditors need to be skeptical of the financial statements being provided by their clients, because skepticism is essential for detecting fraud and protecting the investing public,” says Joe Brazel, corresponding author of a paper on the study and the Jenkins Distinguished Professor of Accounting in North Carolina State University’s Poole College of Management. “However, recent research suggests audit supervisors often punish staff for exercising skepticism that does not identify a misstatement—or fraud,” Brazel says. “This presents auditors with an ethical conflict between acting in their own self-interest and acting in a way that improves audit quality and protects the public.

At June 12 Open Meeting, PCAOB To Consider Proposal for New Standard, Adoption of Amendments to Auditing Standards and PCAOB Rule [PCAOB]
At the meeting, the Board will consider the following:

• A proposal to replace the PCAOB’s existing auditing standard related to an auditor’s use of substantive analytical procedures with a new standard: AS 2305, Designing and Performing Substantive Analytical Procedures.
• Adoption of amendments to two PCAOB auditing standards, AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement, to address aspects of audit procedures that involve technology-assisted analysis of information in electronic form.
• Adoption of an amendment to PCAOB Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations.

Talent

Pipeline Pledge: How small commitments can make a big difference [Journal of Accountancy]
For Sue Coffey, questions about the talent pipeline for the accounting and finance profession have become as common as 100-degree days in Las Vegas. “I don’t think a day goes by where I don’t hear from someone that is challenged with their ability to find, attract, and retain professionals,” said Coffey, CPA, CGMA, AICPA & CIMA’s CEO–Public Accounting. On Tuesday — when thousands of 2024 AICPA & CIMA ENGAGE attendees heard from Coffey and other representatives of the National Pipeline Advisory Group (NPAG) — those talent questions continued. Coffey and the session panelists answered the questions with a question of their own: How can you help?

Young Climate Warriors Could Be the Key to Accounting’s Future [Bloomberg Law]
There seems to be a disconnect between a younger population that wants to be at the forefront of fighting climate change and the desirability to pursue a degree in the accounting profession that is on the frontlines of advising businesses to take action to decarbonize the American economy.

If you’re looking for talent, look no further than Accountingfly’s Always-On Recruiting. Get great candidates in audit, tax, and accounting in your inbox every week–FREE!

Accountants Behaving Badly

Two partners of Scarsdale accounting firm plead guilty to tax fraud [Mid Hudson News]
“As they admitted in court, the defendants, both certified public accountants, conspired to fraudulently reduce the tax liability of clients of their accounting firm,” U.S. Attorney Damian Williams said. “This case serves as a reminder to all Americans that they are required to truthfully report their earnings and that criminal penalties could await those who fraudulently deceive the IRS, as George Sanossian and Jack Sardis have learned. My Office will continue to hold to account those who scheme to impede the lawful functions of the IRS.”

Lawsuit: ‘Grandfatherly tax accountant’ Joseph Pezzano scammed Peco retirees out of $18.5 million [Philadelphia Inquirer]
Joseph Pezzano had pitched his investment plan to potential clients as a conservative, low-risk option, the perfect choice for retirees looking to safely invest their life savings. “You’re not going to make a killing on it, but you’ll be consistently getting money,” Pezzano told a former Peco employee in 2021, according to a recent court filing. That man decided to roll his 401(k) and a lump-sum cash distribution in lieu of a Peco pension into what he believed to be a self-directed IRA. Those former clients are now questioning whether Pezzano had invested their money at all, or whether it was simply stolen. And, if it’s gone, how will they pay their bills?

Cheating in the Profession [CPA Journal]
CPAs are respected for their subject matter expertise and high ethical standards. In the past several years, however, the unethical behavior of some CPA firm employees has led to increased public scrutiny. Cheating scandals involving the ethics portion of the CPA exam and other training courses by members of several CPA firms have thrown ethics into the spotlight and resulted in the largest SEC fines of accounting firms in history. It is important for CPAs to recognize the threat posed by cheating and to develop an understanding of why it happens.

Does this also count as an accountant behaving badly or is it just behaving badly?

Unlicensed Detroit CPA, real estate agent enters plea [FOX 2 Detroit]
A Detroit woman accused of acting as an unlicensed real state agent and certified public accountant (CPA) entered a no contest plea this week. Krystal Davis, 37, was the subject of a Hall of Shame investigation in 2020. She pleaded no contest to one count of accounting violations-unlicensed CPA and two counts of occupational code-unlicensed real estate agent.

Standards

Financial Accounting Foundation Issues 2023 Annual Report—GASB 40^th Anniversary Edition [FAF] The report is available as a printable PDF file and as an enhanced digital version. The annual report, “Standards That Work from Main Street to Wall Street,” commemorates the 40th anniversary of the creation of the Governmental Accounting Standards Board (GASB). The report provides a snapshot of the major milestones over the last 40 years of its Board and staff as they have worked to earn the responsibility entrusted to them: to develop and issue accounting standards through a transparent and inclusive process intended to promote financials reporting that provides useful information to taxpayers, public officials, investors, and others who use financial reports.

Good Deeds

Deloitte workers clean up Louisville neighborhood [WAVE]
Jordan Harris, one of the volunteers said it was good for everybody. “When you’re used to kind of being in front of a computer screen, used to being in an office all day, it’s really good to just take it outside, go pick up trash, puck up litter and see a community be improved,” he said.

More on how Deloitters across the country spent Impact Day here.

Technology

Friendly reminder to talk to your staff about scams and how to spot them.

Scammer impersonating me trying to scam my employee on her personal cell phone pic.twitter.com/xPrsGIyta5

— Logan Allec, CPA (@loganallec) June 6, 2024

How do different accounting firms use AI? [Thomson Reuters]
The 2024 Generative AI in Professional Services Report from the Thomson Reuters Institute found that 30% of tax and accounting firms are in the consideration phase of whether to use GenAI tools, while 49% have no current plans to use.  According to survey respondents, 8% of tax firms identified as using GenAI technology, with 13% of firms planning to use the tech soon.

Career Advice

6 signs you’re good at your job, according to an HR exec with over 35 years of experience [Business Insider]
*neurodivergents sweating nervously while reading this*
The ease at which you can do your job — how challenging or awkward it might be — is a good indication of how you’re performing. You might find that your emails are going down or you’ve got time at the end of the day, week, or month because you’ve overachieved. Conversely, if you keep more paper in the bottom left-hand drawer because you haven’t gotten to it, it may signal that you’re underperforming.

People

Baker Tilly admits 41 new principals [Baker Tilly]
“Our new principals embody the spirit of leadership and innovation that is at the core of Baker Tilly,” said Baker Tilly CEO Jeffery Ferro. “Their commitment to excellence and growth is key to continuing to drive our firm forward.”

KPMG names D.C. area managing partner [Virginia Business]
Patrick Ryan has been named managing partner of Big Four accounting firm KPMG’s Washington, D.C.-area office, the company announced Thursday. In the role, Ryan will oversee more than 3,000 employees and also will be the firm’s U.S. federal business leader and sector leader. He succeeds Tim Gillis, who is retiring Sept. 30 after 26 years at KPMG. He will split his time between the KPMG Tyson’s Corner and Washington, D.C., offices, a spokesperson for the company said.

Deloitte Global CEO Joseph Ucuzoglu named to USC Board of Trustees [University of Southern California]
USC alumnus Joseph Ucuzoglu, Deloitte Global CEO, has been named one of the newest members of the USC Board of Trustees. Ucuzoglu, a Los Angeles native, graduated from USC in 1997 with a bachelor’s degree in accounting. He currently serves as chair of the USC Marshall School of Business Board of Councilors and is a member of the USC Leventhal School of Accounting’s Securities and Exchange Commission and Financial Reporting Institute Advisory Council.

Citi CEO Jane Fraser posted this on LinkedIn:

Consulting, Or Something Like Consulting

How Top N.Y. Officials Helped a Lobbyist Cash in on State Government [New York Times]
In the midst of the pandemic in early 2021, New York state officials were hashing out how to build a mobile app to display users’ vaccination status when an unfamiliar face suddenly started joining the conference calls. The new participant, Michael Balboni, was a former state lawmaker and appointee of three previous governors, and more recently had been working as a lobbyist in Albany for Google, Oracle and other prominent clients. He was also a close friend of a top official in the budget office, the agency overseeing the app’s rollout. Soon after, one of the contractors overseeing the app’s development, Deloitte Consulting, signed Mr. Balboni up as a consultant, then as a lobbyist, paying him more than $300,000 over the next two years.

The post Friday Footnotes: When Managers Punish Professional Skepticism; EY Client Gets Boned; Recruiting Climate Warriors? | 6.7.24 appeared first on Going Concern.

EY US did post an ad though.

A career in accounting is about more than just numbers. Learn more about working at EY. https://t.co/yTsnZ3gzQ7 pic.twitter.com/mjSi1sBVQ2

— EY US (@EY_US) June 3, 2024

Hmm. Well, here’s some real news.

WSJ’s CFO Journal wrote about Forvis and Mazars making it official over the weekend:

Accounting firm Forvis acquired the U.S. unit of Mazars as part of a new international partnership, marking another unique structural shake-up in the industry as peers carve out divergent paths to boost their market share.

The firms finalized the arrangements on Saturday following an agreement signed last November. The deal creates a combined global audit and advisory network with nearly $5 billion in annual revenue.

The partnership will allow Mazars to build on its existing U.S. presence and Forvis to plant its flag internationally. Forvis currently has limited consulting operations in the U.K. The firms’ executives agreed to an acquisition in the U.S. because they both operated there, and they agreed they would only maintain one operation in each country in which they were located.

Neither Forvis nor Mazars, which is based in Paris, took on debt as part of the transaction.

Next stop, Africa! Keep your eyes peeled for some deals and remember that we called it.

We didn’t have a weekend discussion last weekend because I’m sick and typing 250 words on a Saturday or Sunday was just too much to ask. You’re welcome to weigh in on the previous discussion from May 26: So What’s Next For the AICPA?

South China Morning Post says PwC has taken another L due to Evergrande:

State-owned China Cinda Asset Management has become the latest major company to terminate its contract with PwC, after at least five big firms recently cut ties with the auditor amid growing concerns about alleged financial fraud tied to embattled developer China Evergrande.

China Cinda has replaced PwC’s services with those of fellow “big four” accounting firm Ernst & Young (EY) for 2024, the asset manager said in a stock exchange filing on Monday.

The decision was made to “practice sound corporate governance and further improve the quality of external audit work,” and in accordance with “relevant requirements of the selection and engagement of accounting firms by state-owned enterprises,” China Cinda said, adding that details of EY’s appointment will be published to shareholders in due course.

Certain members of the Australian government want the “high priests of commerce” (a.k.a. Big 4 firms) to pay more taxes:

After a year of scandals, bad publicity and a carousel of parliamentary inquiries shining a light on the shadowy world of the big four global accounting firms, it’s time for reform.

State and federal governments fork out more than $1 billion a year on auditing and consulting services delivered by the big four — EY, KPMG, Deloitte and PwC.

Yet the structure of these high priests of commerce enables them to shirk more than $100 million a year in tax.

A NSW parliamentary report tabled on Wednesday described the big four as “pseudo-corporations” that should be taxed accordingly.

The NSW inquiry, chaired by Greens MP Abigail Boyd, released a series of hard-hitting recommendations that included requiring the large consulting firms to pay payroll tax on partnership earnings.

Boyd, who chaired the inquiry, estimates that if adopted the recommendations would add between $50 million and $60 million per year in payroll tax to NSW coffers alone — equivalent to more than $200 million over four years. She told parliament the figures had been validated by external accountants.

GOOD JOB, PWC. See what you’ve done?

Do Chinese investors trust expanded audit reports? A Phys.org article about academic research:

The global financial crisis of 2007–2009 prompted calls for greater transparency in auditing processes, and since 2013, the auditors of UK-listed companies have been required to highlight key audit matters or KAMs. However, according to a paper by SMU researchers, there has been ‘mixed evidence’ regarding the impact of the regulation and whether investors find such disclosures useful.

SMU Associate Professors of Accounting, Goh Beng Wee and Jimmy Lee, along with co-researchers from Tsinghua University and the Central University of Finance and Economics in China, consequently decided to examine the impact of expanded audit reports on investors in a ‘large and important emerging economy’, namely China.

The study, titled “Informativeness of Key Audit Matters: Evidence from China,” states that while additional auditing information could mitigate investors’ concerns, especially as there is ‘limited firm-level reporting and lack of alternative sources of information’ in China where the media are state controlled and censored, investors ‘could become more suspicious about the quality of a firm’s financial reporting.’

“That’s the tension we introduce in the paper,” Professor Goh said. “Information is not so readily available, but auditors are not as credible in the Chinese market, so this could lead investors to wonder whether they can be trusted.”

A couple of Canadian Deloitte partners are accused of not doing their one job:

Two partners of Deloitte LLP face professional misconduct charges for their audit work at Bondfield Construction Co. Ltd., which sought insolvency protection in 2019 amid allegations of fraud by past management.

Chartered Professional Accountants of Ontario, the regulatory body for the province’s accountants, alleges that Felice “Phil” Iorio and Steve Kostich failed to obtain sufficient evidence to support Bondfield’s audits, failed to adequately query company management and failed to maintain “sufficient and appropriate professional skepticism,” among multiple claims.

The two men are currently contesting the claims by CPA Ontario’s professional conduct committee at a hearing before the organization’s tribunal. Attempts to reach the two men via LinkedIn were unsuccessful. John Finnigan, a lawyer representing Deloitte and the two men, declined to comment.

Interestingly, CPA Ontario hasn’t dragged Deloitte into this drama, just the two partners.

CPA Ontario spokesperson Kathryn Hanley said in an e-mail that the regulator is not pursuing Deloitte because “an individual faces discipline in these instances based on the Canadian Audit Standards which state that the engagement partner themselves shall be responsible for the direction, supervision, and performance of the audit engagement and compliance with professional standards for the audit.”

Some bad news from across the pond:

Britain’s gender pay gap may not close for another 45 years, fresh research from accountancy giant PwC revealed.

A typical male worker in the UK earned 11.8% more than the average female in 2023, the data revealed.

It represents a 40-basis point improvement from the 12.2% gap recorded in 2022 and more than a 1% tightening compared to 12.9% in 2021.

Despite the reduction in the gap, PwC said the “rate of change remains modest”, adding that based on its calculations it will be another 45 years until both genders’ pay is the same.

A bit of CFO drama in Detroit:

The Detroit Riverfront Conservancy board voted to fire Chief Financial Officer William Smith and is replacing CEO Mark Wallace, who resigned amid alleged financial wrongdoing by Smith, the organization said Friday.

The group announced the leadership changes two days after The Detroit News reported the amount feared missing from the conservancy could reach $40 million. On Friday, the conservancy said investigations by auditing firm PwC and another by the Honigman Law Firm found the loss to the organization is more than $40 million.

The late Friday announcement is the latest unprecedented turn for the nonprofit that previously had a sterling reputation and whose goal of transforming the downtown riverfront is often hailed as playing a key role in downtown’s revival. The conservancy oversees the popular RiverWalk bike-pedestrian path and much of the adjoining public spaces. The group’s board is chock-full of influential Metro Detroiters and has an A-list group of funders.

The conservancy previously placed Smith on unpaid leave after disclosing earlier in May an investigation into potential financial mismanagement that has since been turned over to the FBI.

There was a ribbon cutting for BDO in San Antonio:

The North San Antonio Chamber of Commerce recently held a ribbon cutting ceremony to mark the opening of a new San Antonio office for BDO, an alliance of accounting and professional service firms.

BDO representatives said their organization serves as a global accounting network, offering resources and opportunities to hundreds of member firms.

According to BDO officials, the alliance has offices in more than 30 states, including Texas offices in Austin, Houston, Dallas and Fort Worth.

Looks like that’s all that’s worth talking about this morning. I’m sure there will be more as the week grinds on. Reach out via email or text if you see something you think we should be talking about, my inbox is always open. Have a good one!

The post Monday Morning Accounting News Brief: Forvis and Mazars Are Official; Hit Partners Where It Hurts: Their Wallets; ‘Auditors Are Not Credible’ | 6.3.24 appeared first on Going Concern.

Municipal Dumpster Fires

Woonsocket city council respond to auditors abruptly quitting [WLNE Providence]
Shout-out Mary Sahady who finally had enough of this bullshit and told this messy client to get bent.
Woonsocket officials are hoping city auditors will change their mind, after they abruptly quit this past week. Woonsocket City auditors officially ended their contract with the city during budget season, citing the “lost confidence in the integrity of City Management.” In a letter dated May 28, Hague Sahady & Co., a certified public accounting company, wrote that the company reached the decision reluctantly and after substantial deliberation. In the letter, Engagement Principal for the Firm Mary Sahady wrote that the city has only provided 43 of the 110 total funds in the fiscal year June 30 2022 audit.

Horseheads Village audit uncovers several money/deposit/accounting issues [WETM New York]
An audit of the Village of Horseheads’ finances done by the New York State Comptroller’s Office shows several issues with the way the Village accounts for or deposits funds, including cash. The audit cites that Villages in New York are, by law, supposed to be audited every year, but The Village of Horseheads hadn’t had one since 2018.

Workplace

Gen Z really are the hardest to work with—even managers of their own generation say they’re difficult. Instead bosses plan to hire more of their millennial counterparts [Fortune via Yahoo! Finance] Resume Genius asked 625 U.S. hiring managers which generation is the most challenging to work with, and 45% pointed to Gen Z. What’s more, 50% of Gen Z hiring managers admitted that their own generation is the most difficult to manage. While just 4% of the hiring managers surveyed expect to hire baby boomers in the year ahead, a third admitted they will probably end up hiring Gen Zers. Despite being the most difficult generation to work with, Gen Z are the second most likely-to-be-hired job candidate of choice. The most popular? Their slightly more seasoned millennial peers (45%). In comparison, only 14% of the hiring managers surveyed expect to hire Gen X workers in the year ahead.

ConvergenceCoaching®, LLC Launches Its 7th Anytime, Anywhere Work Survey [ConvergenceCoaching]
Whether you’re a managing partner or just a grunt, you’re invited — and encouraged — to take CC’s Anytime, Anywhere Work Survey. We’ll remind you a few more times.
Originally released in 2014, the ConvergenceCoaching Anytime, Anywhere Work Survey has provided a platform for firms to elevate their flexible benefits and change firm culture. The Firm Leadership portion of the survey is designed for completion by one person from each accounting and consulting firm — usually the Managing Partner or a top HR professional. Those leaders are asked to provide information about their firm’s remote and flex work practices. The Team Member survey is open to anyone currently working in an accounting and consulting firm and multiple team member responses per firm are welcome.

Also, this is your weekly reminder that Accountingfly has loads of professionals available to hire. Sign up for Always-On Recruiting to get an email every week with choice candidates — it’s free!

News

EY’s PR nightmare: A ‘secret drinking club’, misconduct allegations and resignations [Stuff]
It began in February with the departure of EY NZ’s chair over an “historical behavioural matter”, and continues. Earlier in May, Stuff revealed EY had launched a new investigation into misconduct allegations. Last week, two senior staff resigned under a cloud. So what is going on at EY, and why does it matter? Stuff is aware of three complaints against one senior male employee, and that there were EY partner-level discussions about him, but ultimately he was kept on. Another senior male staff member is the subject of multiple concerns voiced to Stuff, covering a range of levels of seriousness. At the lower end, a former female employee described keeping a folder of “inappropriate messages from [the man], usually ‘complimentary’ comments on my appearance, requests to join for drinks or comments along the lines of ‘I’d have more fun if you were here’”. She said she didn’t lodge a formal complaint about him, but felt her folder was “another example of females having to take action to safeguard against actions of their male senior leadership”. Another described the man as “a predator. [He] is just disgusting.”

Former PwC partner sues firm for allegedly linking him to tax scandal [Financial Review]
A former PwC Australia partner alleges people have shunned and avoided him after being incorrectly and publicly linked to the firm’s notorious tax leaks scandal. Richard Gregg, who successfully sued the firm last year for failing to follow proper process in its attempt to fire him, has filed a new claim of defamation and breach of contract against PwC and former acting chief executive Kristin Stubbins. The claim, filed on Wednesday against PwC and Ms Stubbins, stems from its response to the tax leaks scandal. As part of the fallout, the firm named Mr Gregg, a research and development incentive tax specialist, as one of eight partners who had left or were in the process of being removed from the firm’s partnership. Mr Gregg alleges the PwC statements have seriously harmed his reputation, caused him “substantial distress, embarrassment and hurt”, and economic loss. He is suing for aggravated damages and economic loss for allegedly being defamed.

Guidehouse claims the Defense Department did not conduct an adequate investigation into claims that a DOD official had a potential conflict-of-interest. [Washington Technology]
Guidehouse has renewed its protest over an $80 million Defense Department contract for audit remediation and sustainment services that went to Deloitte. A previous protest succeeded after Guidehouse raised issues around potential conflicts of interest. The Defense Department agreed to rethink the choice of Deloitte. Now Guidehouse has resurrected its protest after Deloitte won the contract for a second time. Here again, Guidehouse is raising issues about a conflict-of-interest because the chair of the technical evaluation board was a former Deloitte employee. In the first protest, the Government Accountability Office found that DOD did not conduct an independent investigation into Guidehouse’s allegations.

Audit

A prescription to curb corporate failures [Financial Times Opinion]
“Professional judgment is a critical feature of any audit,” according to the UK watchdog, the Financial Reporting Council, which in 2022 urged auditors to sharpen their scepticism. An independent mindset is particularly important when it comes to assessing whether a business is a “going concern”. Alongside internal controls and the potential for fraud, deciding whether a company risks going bankrupt is a critical focus for auditors. It is here, according to new research, that UK firms are falling short. It is understandable that auditors sometimes hesitate to pull the trigger on going concern warnings. Assessing future threats to a business is hard, as the unforeseen impact of pandemic and war has shown in recent years. Fraud — another area where auditors could be more alert — sometimes undermines their attempts to root out the truth. Conflicts of interest with more lucrative non-audit opportunities are a potential distraction for big firms.

China Vows Further Probes on Parties in Evergrande Fraud [Bloomberg]
The China Securities Regulatory Commission on Friday formally announced it will impose a 4.18 billion yuan ($577 million) fine on Evergrande’s onshore unit Hengda. Authorities are also poised to impose a fine of at least 1 billion yuan on PricewaterhouseCoopers LLP, which acted as an auditor for Evergrande, Bloomberg reported earlier this week. The Ministry of Finance may announce the penalties on PwC as soon as this week, people familiar said, asking not to be identified discussing a private matter.

AI

Deloitte: Enterprise Gen AI Moving Fast, but Change is Key [Technology Magazine]
According to the research, organisations with high levels of Gen AI expertise are leading the charge when it comes to scaling adoption across their operations. A full 73% of highly skilled AI firms report moving quickly to adopt Gen AI tools and systems across business functions. This group is doubling down by investing heavily in technology infrastructure and providing their workforces with extensive access to Gen AI capabilities. The most advanced firms understand that unlocking maximum value hinges on seamlessly integrating the technology throughout their processes and empowering employees to leverage it.

Banks could lose $40 billion from fraud with the help of AI, Deloitte predicts [Quartz]
As the banking sector continues to funnel resources into building up its artificial intelligence capabilities and offerings, scammers are leveraging the same technology to carry out fraud. U.S. banking losses from fraud could total $40 billion by 2027, up from $12.3 billion in 2023 — a massive sum enabled by widespread scams powered by generative AI, Deloitte said in its 2024 Financial Services Industry Predictions published Thursday. Generative AI uses data to create original content, like text, images, music, audio, and videos. Using the technology, bad actors can carry out mass fraud ranging from email and phone “phishing” scams, to using AI deepfake audios and videos to impersonate both clients and banks. The Deloitte Center for Financial Services estimated that generative AI email fraud losses alone could total approximately $11.5 billion in just four years in the case of “aggressive” adoption.

Deloitte’s report: Generative AI is expected to magnify the risk of deepfakes and other fraud in banking

EY Finds CEOs Prioritise AI Investments Over Sustainability [Technology Magazine]
EY has found that technology investments, including AI, remain a crucial strategic priority. The company’s Outlook Pulse survey confirms that UK-based CEOs in particular are feeling more optimistic about their immediate prospects, leading them to favour AI investments. This, according to EY, is so that they can gain a competitive advantage within the global business landscape. However, the survey also confirms that AI is being prioritised over sustainability targets. Nearly half (47%) of CEOs have confirmed that they are struggling to present a strong business case for sustainability investments.

Tax

Michael Jackson’s Heirs Have Not Received Any Money Amid Estate’s IRS Dispute [Rolling Stone]
The beneficiaries of Michael Jackson’s trust — specifically the King of Pop’s children and Jackson’s mother, Katherine — have not received any money amid a three-year dispute between the IRS and the late singer’s estate. According to Entertainment Tonight, Jackson estate co-executors John Branca and John McClain rejected a bid by the beneficiaries to have some funds released, with the executors citing the ongoing audit by the IRS. Back in 2021, the IRS issued a note of deficiency, claiming that the Jackson estate “undervalued its assets” and owed “an additional $700 million in taxes and penalties.” The estate and the IRS have volleyed about the audit over the past three years, with the situation exacerbated by legal in-fighting between 93-year-old Katherine Jackson and Michael’s youngest son, Bigi “Blanket” Jackson.

IRS announces tax relief for taxpayers impacted by severe storms and flooding in Massachusetts; various deadlines postponed to July 31 [IRS]
The tax relief postpones various tax filing and payment deadlines that occurred from Sept. 11, 2023, through July 31, 2024 (postponement period). As a result, affected individuals and businesses will have until July 31, 2024, to file returns and pay any taxes that were originally due during this period.

United States v. Eaton: IRS Summons Power Overrides EU Privacy Laws [National Law Review]
A US federal district court judge recently endorsed the broad investigative powers of the Internal Revenue Service (IRS) in United States v. Eaton Corp., No. 1:23-mc-00037, May 16, 2024 (N.D. Ohio). During its audit of Eaton’s transfer pricing of a royalty arrangement with Eaton’s Irish affiliate, the IRS sought performance evaluations of certain employees of the affiliate. Eaton declined to provide the evaluations citing relevancy and legal objections based on EU privacy laws. The IRS subsequently served Eaton with an administrative summons seeking the evaluations. In the ensuing summons enforcement action, Eaton initially prevailed before a magistrate judge on both grounds. However, the IRS persuaded the district court judge to reject the magistrate’s recommendation and enforce the summons.

Private Equity in the Profession

Grant Thornton Is Now the Biggest Accounting Firm to Get Private-Equity Backing [Wall Street Journal]
Yeah this surely will end well.
The New Mountain-led group’s investment constitutes a 60% stake in Grant Thornton’s U.S. unit and centers on the nonaudit business, people familiar with the matter said. But the new majority owners will also have a contractual relationship with the audit business through a management services agreement between the two entities, the people said. The sale will allow the firm to grow through acquisitions and investments in tech and personnel, likely at a faster pace and with less risk than it otherwise would have, said Seth Siegel, Grant Thornton’s U.S. chief executive. The firm aspires to be a more attractive acquirer of companies as it looks to expand its share among middle-market corporate clients, typically ranging from $100 million to $10 billion in annual revenue, he said.

What’s going on at Grant Thornton? [Accountancy Age]
You know it’s bad when sites that are normally way less negative than we are call things out.
Grant Thornton has announced the layoff of 350 employees, equating to approximately 3.5% of its U.S. workforce. This latest round of job cuts comes on the heels of two previous rounds in 2023, where the firm let go of 300 and 200 employees, respectively. The latest reductions span across the firm’s advisory, audit, and tax practices, up to the level of managing director. However, the timing of these layoffs, coinciding with the firm’s impending private equity deal, has raised eyebrows within the industry.

Bain Capital put 250 million dollars into Sikich for a minority position.

I actually worked for a company Bain Capital bought called GST Steel. It went bankrupt.

Private Equity is getting into more and more public accounting firms.

It will not end well for public accounting.

— Mike Sylvester, CPA (@MikeSyl36625988) May 30, 2024

The post Friday Footnotes: The Biggest PE Deal to Date; AI Is Moving Fast, Says Deloitte; EY’s Secret (and Nasty) Drinking Club | 5.31.24 appeared first on Going Concern.

Has anything of note happened since Friday? Let’s find out.

First, a few pieces of merger news.

The local news in Cincinnati covered this strategic move:

One of Greater Cincinnati’s largest accounting firms is being acquired by an Indianapolis company.

Blue Ash-based tax, advisory and audit firm Cassady Schiller CPAs & Advisors will become part of Katz, Sapper & Miller in a transaction that will be completed May 31. Terms were not disclosed.

The deal will be Katz, Sapper & Miller’s entry into the Ohio market.

Nearby, a Canadian firm is elbowing its way into the United States:

Melo, a Leamington, Ontario, Canada-based accounting, tax, legal, and financial advisory firm, has acquired Edwards, Ellis & Associates, which has offices in Troy and Ann Arbor (Michigan). Terms of the transaction were not disclosed. It is Melo’s first foray into the U.S. market.

A Forvis deal we didn’t feel warranted its own article when it was announced last week (and still doesn’t):

Accounting firm Forvis has struck a deal to acquire Charlotte-based ConTech 360 in a move targeted at bolstering its focus in the construction technology sector.

The transaction, announced May 20, is expected to close this fall. It marks Forvis’ first acquisition in the construction industry. Financial terms of the deal were not disclosed.

ConTech360, founded in 2019, provides construction technology services. Its offerings are tailored around providing information technology solutions, reducing overhead and increasing efficiency.

ConTech360 has more than 125 active clients and 60-plus consulting engagements, a Forvis spokesperson said.

We should really discuss the biggest merger though. KPMG Switzerland and KPMG UK are clanning up:

Partners at KPMG Switzerland and KPMG UK have voted overwhelmingly in favour of merging their partnerships and will become a new $4.4bn business, working across audit, tax and legal, and advisory.

This will make the new firm the second largest in the KPMG network by some distance.

Jon Holt, KPMG UK’s chief executive and senior partner will lead the new partnership as group CEO with Stefan Pfister, current CEO of KPMG Switzerland as group deputy CEO of the combined firm.

“This marks a historic moment for both firms. We will be stronger as one combined firm and together we will have the scale to significantly enhance our ability to deliver great outcomes for our clients both internationally and within our domestic markets,” says Jon Holt, chief executive and senior partner of KPMG UK.

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a report called Evolution of Mid-Tier Accountancy Firms. The short:

ICAEW’s latest research reveals the polarised reactions to private equity funding within the sector, as well as expectations for profit growth and shifts in services lines over the next three years.

We can do a full breakdown of the paper later, for now here’s an interesting bit:

Recruitment of qualified staff was identified as a top talent challenge for 67% of respondents, while recruitment of trainees was considered a challenge by 10%.

And this:

Firm structure and operational model
Firm structures are evolving rapidly, with growth through mergers and acquisitions (M&A) occurring for nearly half of firms in the recent past, and more than half looking to pursue this activity in the next three years. This ongoing activity means that firms counted in this tier are in a perpetual state of flux. M&A has been a popular mechanism to help many firms satisfy their ‘growth-led’ culture.

Some firms are embracing private equity investment, seeking capital and strategic partnerships to fuel growth and innovation. Other firms see an opportunity to distinguish themselves by remaining independent and growing organically. The emergence of private equity in the profession has polarised opinions, but it appears set to remain part of the range of structures operating in the mid-tier.

AccountancyAge wrote about the private equity section of the report:

When asked about private equity, 57% of respondents ranked it as a top three macro trend impacting the profession.

Additionally, 12% of firms said they had secured private equity investment, while another 12% said they would like to secure PE investment in the next three years.

However, 64% said PE was “not [or] not at all attractive” to their firm, while 17% said they saw remaining independent as an opportunity.

“These findings paint an important picture of mid-tier practices as firms evolve to face the challenges of the future,” says Alan Vallance, ICAEW Chief Executive.

Yeah, we definitely need to dig around in that report.

A Spokane, Washington business journal wrote about a CPA of note. This guy sounds cool.

Brian Behler, CEO and president of Skils’kin, a nonprofit that provides opportunities for people with disabilities, will retire in June following a 13-year tenure with the organization.

Behler, 65, is a certified public accountant who founded and built several companies over his nearly 40-year career. A graduate of Washington State University, Behler started his career in Seattle with the public accounting firm Arthur Andersen & Co. After leaving that role in 1989, Behler then spent the next decade starting multiple businesses in the Puget Sound area, including a manufacturing and import company of specialty coffee and a soft drink company specializing in bottled Italian soda. He also was for a short stint a part owner of a 300-foot ship that he sailed to Alaska to process salmon.

How he responded to the question of taking a different path in life:

As someone who’s had so many career experiences, is there something else you wish you had done?

For those of us who get to this stage in our career, it’s a common reflection. If not this, what else would I have done? I would hope that I might have gone the general contractor route. I like creating stuff. I learned that from my parents and picked up those skills. I like envisioning how a house would look if it were more open, or if this room should be elsewhere. I’ve torn out a lot of walls in my homeowner career. At first, it was because I didn’t have a lot of money, but then I started thinking in terms of improvements I can make to turn it into a masterpiece. The house I live in now is quite modest, but it has a masterpiece outdoor kitchen.

I’d love to hear from our readers on this question. What would you have done with your life had you not ended up in accounting? I always wanted to be a writer when I grew up. But, like, a young, female Ray Bradbury sort of writer, not a laptop hobo grinding out shitposts for an accounting blog. Life’s funny sometimes.

Journal of Accountancy has advice for practitioners with childfree clients:

Traditional financial planning strategies assume that clients loosely follow a life path that starts with accumulation during years that include marriage, homebuying, child-rearing, and career and/or business growth, followed by decumulation through retirement and/or succession, estate, and legacy planning. However, this general formula, which is heavily focused on helping clients pass along the maximum amount of wealth to next generations, is not as relevant to the more and more Americans who are opting to remain childfree.

The Pew Research Center found in 2015 that the portion of U.S. women choosing to forgo child-bearing had risen by 50% overall since the 1970s, after a decades-long rise partially offset by a decline in the 2000s. More recently, a 2021 Pew survey of childless adults revealed that 44% said they are unlikely to ever become parents, a 7-percentage-point increase in just three years.

These trends have expanded a demographic for CPA financial planners to consider: the childfree client, who has financial planning needs and considerations as varied as the reasons they have for opting out of parenthood. Here are the key considerations and strategies to help this growing group plan effectively for their financial futures.

Related paper: The Rise of DINKs: How Childfree Couples are Reshaping Economies

Bloomberg Law covers the Deloitte retirement lawsuit:

Arguments over Deloitte LLP’s handling of its retirement plan fees prompted different reactions from a panel of Second Circuit judges, whose questions to counsel Friday suggested disagreement over how to view the case before them.

Judge William J. Nardini pointed out an apparent contradiction in the Deloitte workers’ case, saying they claimed to lack information about the administrative services received by various retirement plans while simultaneously maintaining that these services are essentially the same across the board and can be easily compared among plans.

The workers’ attorney, Mark K. Gyandoh of Capozzi Adler PC, responded that major national retirement plan recordkeepers provide services that can be considered fungible.

Nardini, who appeared unimpressed with this answer, said retirement recordkeepers provide a host of different services that can’t be considered fungible, including maintaining participant call centers and tax form services.

“How can you tell us they’re basically the same if you don’t know what they are?” he asked Gyandoh.

CBC News talks about how EY made half a million dollars:

The audit that led to an Ottawa Hospital lawsuit, with explosive allegations about a fraud conspiracy involving its contractors and two hospital managers, cost taxpayers more than $500,000, according to new information obtained by CBC.

The hospital has fought CBC’s efforts to obtain information about the true cost borne by the public for a case that began in 2016 and was settled more than four years later without going to trial.

…

In 2015, EY Canada was hired as an outside auditor to investigate “irregularities” among the hospital’s procurement practices.

Some of the findings of the initial investigation were detailed in an eye-popping statement of claim filed by The Ottawa Hospital (TOH) in January 2016.

It alleged a “fraudulent scheme” involving two former longtime directors, both in charge of large budgets and projects. The suit alleged the managers conspired with five contractors to defraud the hospital in exchange for luxury vacations, family favours and discounts on home renovations.

EY’s investigations continued for three more years, billing a total of $549,235.32, according to the information released by the hospital last Friday.

Best r/ottawa reaction:

Comment
byu/fibonaccipizza from discussion
inottawa

KPMG borrowed a word from Grant Thornton:

KPMG launches its first-ever dynamic Audit Quality Report to meet client and market demand

KPMG Audit has modernized its Audit Quality Report (AQR), transitioning it from a static document, released once a year, to a dynamic, data-driven platform that will be updated to respond to market developments.

KPMG is the first Big Four firm to buck the trend and truly modernize its Audit Quality Report. The new platform features the full report, a dynamic data dashboard that will be updated frequently, and blogs and data graphics aligned with the five pillars of our Audit Story.

I daresay this is might actually be cool?

Some notes:

– KPMG Audit’s nearly 10,000-strong Next Gen Auditors are developing new skills and bringing diverse perspectives to engagements. Most Audit professionals (62%) are from underrepresented groups, a 5% increase from 2020.

– Through KPMG Audit’s Engagement Management Lifecycle program, the practice is addressing the root cause of recent quality challenges while delivering a better and more consistent experience for our auditors.

• KPMG Audit pulled work forward, reducing hours for the core engagement team in traditional busy season while standardizing and centralizing more activities.
• The Audit practice monitored 100,000+ key milestones through monthly reviews of its public clients to help teams execute their audit plans.

– More than 1.2 million audit hours involved professionals from the Tax and Advisory practices.

We’ll be keeping an eye on this.

Some drama in Jersey City a partner definitely didn’t sign up for:

A woman was removed from Wednesday night’s Board of Education meeting, but not before the Board was presented with the results of a financial audit of the 2022-23 school year and a Corrective Action Plan.

The report found payroll discrepancies, inaccurate and inconsistent accounting, and contracts potentially issued improperly.

There were a total of 17 findings in the audit, down from the last audit’s 23 findings. “It’s more about the magnitude of a finding and not the number of findings,” said Jeffrey Bliss, Public School Accountant from Lerch, Vinci & Bliss, who gave the presentation.

…

Toward the end of the meeting, a member of the public removed after refusing to obey Board President Dejon Morris’s order to leave. Morris had ordered the room cleared after several audience outbursts. “The audience will be in order” Morris had shouted, while banging his gavel. When the shouting began again, Morris said “security just clear the room.” Thirteen minutes of back and forth between Morris, the Board’s attorney and the audience member ensued, culminating with the woman’s removal.

Apparently this isn’t the first time a Jersey City BOE meeting has devolved into chaos.

OK, I think that’s it. If you have something to say about any stories linked here, articles we’ve written, important happenings around the profession we may have missed, or literally anything else remotely related to the practice of accounting (or cats), give me a shout by email, text, or Twitter. Text is your best bet, my inbox is a quagmire of bullshit press releases. All tips are anonymous unless you expressly say otherwise for some weird reason.

Have a great week!

The post Tuesday Morning Accounting News Brief: A New Kind of Audit Quality Report; Merger Mania; Skilled Talent, Not Newbies | 5.28.24 appeared first on Going Concern.

PwC Australia is in court arguing that it isn’t responsible for sexual assault that happens off campus after hours and especially not so because the alleged assaulter completed two sexual harassment learning modules.

Employers can be found vicariously liable for alleged sexual assault that occurred between employees outside working hours but only where it was connected with their employment, according to a leading employment law expert.

PwC is facing legal action claiming the accountancy firm is liable for the alleged rape of a graduate employee following after-work drinks.

The graduate employee is suing PwC for damages over two alleged incidents of sexual assault by a colleague after work hours, court documents show. It includes one claim that the young woman was raped at her home after she went to pubs with colleagues following a meeting held at PwC’s office.

PwC’s argument is that happy hour was not an official work event it required the two employees to attend therefore the firm isn’t responsible for anything that may have happened that night.

The firm argued it was also not vicariously liable for the alleged incident because PwC had taken “all reasonable steps” to prevent such behavior.

It pointed out that the alleged perpetrator completed two training modules in 2022 on workplace behaviour that covered preventing sexual harassment. Two months before the alleged incident, the firm says, the man completed another introductory training on preventing sexual harassment.

This EY news almost got buried because honestly I didn’t even see the press release. Not the AI framework part, the bolded part.

Today the EY organization has announced new technology capabilities and a global Artificial Intelligence (AI) Assurance framework for EY professionals as part of a multi-year, technology driven audit transformation program which is supported by plans to align approximately 9,000 Technology Risk professionals to the Assurance service line.

In line with evolving audit and assurance standards and guidelines, the EY organization has also released a global AI Assurance framework to all EY Assurance professionals that considers the impact of AI used in companies. This includes how AI is applied in financial reporting processes and considers the related risk management frameworks and controls that organizations implement. The framework has been rolled out to more than 130,000 EY Assurance professionals.

Can someone send us those slides? Please and thank you.

Illinois CPA Society has issued a new pipeline report: Re-Decoding the Decline. Find it, and other ICPAS insights, here.

Thanks to the widespread distribution efforts, 7,780 accounting students, graduates, and young professionals under the age of 35 who were pursuing or had pursued accounting degrees and careers—including CPAs and non-CPAs—completed the survey, including 3,287 full- or part-time students. In all, the survey responses compiled represent respondent perspectives from every state in the nation, along with the District of Columbia, Puerto Rico, and even abroad.

The resulting 2024 Insight Special Feature, “Re-Decoding the Decline: An Updated CPA Pipeline Report,” reveals respondents’ perceptions of CPAs and the CPA credential, along with the top challenges and deterrents driving their decisions to pursue the CPA credential or not. The findings provide invaluable insights the CPA profession and its stakeholders cannot ignore while trying to counter the persistent decline in the number of individuals pursuing the CPA credential.

Earlier: The CPA Credential and the Profession Are in a Race For Relevance, Says ICPAS CEO Todd Shapiro (October 2021)

UK audit firms are asleep at the wheel according to a new report.

Three in four audit reports failed to provide alerts that companies, which ultimately failed, risked going bankrupt by providing a “material uncertainty related to going concern” in the year before collapse, according to a report published on Monday by the Audit Reform Lab, a think-tank at the University of Sheffield.

Auditors are required to include a going-concern warning if they believe there is a risk that the company may go bankrupt, rather than making a prediction that it will.

The research, which analysed the audit reports of the 250 largest publicly listed companies that collapsed between 2010 and 2022, found that EY gave going-concern warnings for just one in five companies it audited in the year before they failed, the lowest out of the Big Four. PwC, Deloitte and KPMG gave warnings in 23 per cent, 36 per cent and 30 per cent of their cases, respectively.

Those numbers seem impressive compared to figures outside of Big 4 where off-brand audit firms issue going concern warnings before a company goes down only about 17 percent of the time.

Michael Shaub of Texas A&M University talks about the PCAOB’s new standards in Bloomberg Tax. TL;DR It’s about time!

The quality control standard represents the give and take of a decade’s worth of consideration on how to improve audit quality among auditors of public companies. Though they have aligned these standards with other standard setters’ quality management standards, the PCAOB has chosen to go further.

The board explicitly cited some of the audit firms’ more egregious behaviors to justify the need for additional regulation—cheating on continuing education exams, altering workpapers, widespread independence reporting failures, and offering impermissible non-audit services. The result is a prescriptive model with eight components, two of which are process components, and six related to firm organization and operations.

Quality risks and responses must be documented and will be assessed similarly to independence threats and safeguards. And the larger firms with more than 100 public clients will have to have an outsider on their board evaluating quality control. The standard applies to all engagements where the firm serves as the lead auditor or has a “substantial role.”

Shout-out to NPR for continuing to stay on top of the accounting shortage.

KPMG opens an AI hub in Ireland:

KPMG Ireland has launched a new EU AI Hub to support clients using new artificial intelligence (AI) technologies and to navigate incoming regulation in the EU and globally.

The facility will lead to the creation of 200 new jobs and will be located in the firm’s Platform X Global Innovation Hub in Dublin’s IFSC.

The new roles will be filled over the next three years in the areas of AI, risk, regulatory services and cyber security.

A whistleblower in Australia says ratting out his former employer worked out great for the tax authorities but him not so much.

Bittersweet is the way tax lawyer turned whistleblower Tony Watson describes the Australian Tax Office’s decision to smack global construction giant Lendlease with an initial $112 million tax bill after his tip-off a few years ago.

He says his sense of vindication, when the ATO’s audit was made public on May 13 this year, was tainted by his sacking and the need to sell the family home, which will be listed for sale on May 22. This is just one of the many costs of blowing the whistle, including a mental breakdown and the loss of his job.

“All because I called those bastards out for doing the wrong thing,” he says.

The situation Watson finds himself in makes a mockery of the corporate whistleblower protections that were introduced in July 2019 and inspired him to take legal action three years later.

Another batch of Big 4-affiliated firms in India have been smacked down by regulators for their close relationship with the multinational body. Keep an eye on this, Indian regulators are going hard on this issue all of a sudden.

The Institute of Chartered Accountants of India (ICAI) has passed orders against five affiliates of auditing major Price Waterhouse, two other entities and two individuals for professional misconduct. In the orders issued this month, the disciplinary committee of the ICAI has directed that the entities concerned to immediately stop existing arrangements with the multinational entities, as the same is circumventing the provisions of the Chartered Accountants Act 1949.

[T]he disciplinary committee said there was apparent sharing of human resources, infrastructure, brand name and contact details, which signifies that in substance, PwC was controlling the respondent firms and that it was “professional misconduct” under the Act.

Earlier and totally related from Friday Footnotes 5.3.24:

• ICAI passes order against three EY affiliates, retired partner for ‘professional misconduct’ [Business Today]
• India’s answer to Big Four firms could be in the works: Here are the details [Business Today]

Carr, Riggs & Ingram, with an assist from CLA, is working their asses off for the city of Santa Fe:

The City of Santa Fe submitted its Fiscal Year 2023 audit Thursday afternoon—one day late of its own self-imposed deadline, and five months short of the state one. Prior to the FY23 audit, officials turned in the city’s FY22 audit more than eight months behind schedule, and before that the city’s audits for 2021, 2020, 2019 and 2018 were also late.

The FY23 audit was completed alongside external auditor Carr, Riggs & Ingram and consultant CliftonLarsonAllen which provides accounting services for the city. The City Council approved a contract in September 2023 with the Carr, Riggs & Ingram accounting firm to compile the FY23 audit for $269,454.

“Completing three audits in less than a year is a massive amount of work. It’s a massive amount of work for the city staff, for contractors, for the auditors themselves—they were working on a very compressed timeline,” Oster says.

KPMG takes a look at the current job market:

Total job openings in the United States continued a downward trend in March 2024. There were 8.5 million openings, down from 8.8 million in February and compared to the peak of 12.2 million in March 2022. Yet openings remain above the 2019 baseline monthly average of 7.2 million.

In March, job openings changed little in 37 states, increased in one state and decreased in 12 states. New Jersey led the gains with 51,000 new job openings, whereas California lost 119,000 and Pennsylvania shed 50,000; those were the largest losses.

Counting California, Florida, Massachusetts, Pennsylvania and Texas, 31 states reported lower average monthly job openings in the first quarter of this year. The opposite trend, or higher monthly job openings, showed up in 19 states including New York, New Jersey and Washington plus the District of Columbia.

And that’s a wrap. As always, please let me know via text or email if you see anything interesting while you’re wandering around out there on the big scary internet (or eavesdropping on partner conversations).

The post Monday Morning Accounting News Brief: Big 4 Firms Hate Going Concern (Warnings, That Is); Being a Whistleblower Blows | 5.20.24 appeared first on Going Concern.

Pipeline

National Pipeline Advisory Group releases draft strategy report [National Pipeline Advisory Group]
NPAG’s draft strategy report is now available [here]. Proposed solutions reflect a profession-wide effort to tackle the talent shortage and attract more people to a rewarding career in accounting.

AICPA Statement on National Pipeline Advisory Group Draft Report [AICPA & CIMA]
Barf.
The National Pipeline Advisory Group (NPAG) has done exemplary work over the past 10 months, and its members should be commended for their care, diligence and selfless service to the profession. While the AICPA & CIMA’s board of directors is still digesting the draft report as a whole, it has expressed directional support for NPAG’s call for an intentional and coordinated effort to evolve CPA licensure. While expanding approaches to CPA licensure alone will not solve the accounting talent problem, we believe our licensure process does need to acknowledge changing market conditions, address the need for a wider and more diverse group of recruits and shift to drive new generations of qualified professionals who can take on the growing challenges of a complex marketplace.

Accounting grads job market update: The future is bright for the ‘language of business’ [Mississippi Business Journal]
“We’re at near 100% placement of students,” said Shawn Mauldin, Ph.D., CPA, director of the Mississippi State University Adkerson School of Accountancy. “There are more jobs than students. It’s certainly been an issue for employers. There’s difficulty in the pipeline.” Mississippi State has approximately 500 students enrolled in the School of Accountancy, and 80 students enrolled in its graduate programs online and face-to-face. Mark Wilder, Ph.D., CPA, dean and KPMG chair of accountancy at the University of Mississippi Patterson School of Accountancy, agreed. “The job outlook for accounting graduates is very good,” he said. “We have 90% or more of our students from our master’s programs that have already accepted employment. Several other students are pursuing a law degree after completing our master’s programs. A few others in our program won’t graduate until December. Our job placement typically reaches 100% by the time of graduation.”

Is It Discrimination If They Would Do It to Everyone?

EY manager claims he was sacked for complaining about 80-hour week [Financial Review]
EY Australia has rejected a manager’s claims he was sacked because he complained about being told to work up to 80 hours a week, had time off with the flu, and took a month’s leave for his wedding and honeymoon. Mr Jeczewski alleged he made four complaints in 2023 regarding his workload – both having too much and too little to do. In late 2022, Mr Jeczewski claimed a senior manager at the firm told him to cancel all his personal commitments and work up to 80 hours a week on a new project. If he refused, it was alleged the senior manager threatened to give him a negative performance review.

News

Lawyers for late Collegeville accountant can’t find where he invested millions for dozens of trusting clients [The Philadelphia Inquirer]
Lawyers for the estate of Collegeville accountant Joseph Pezzano say they’ve been unable to find any records supporting millions of dollars in investments he’d handled on behalf of dozens of clients in at least three states. Pezzano’s death last Christmas Day at the age of 73 has set off a flurry of litigation as clients seek to recover investments ranging from $12,000 to $3 million each. The FBI is conducting interviews and issuing subpoenas. On Thursday, the accounting firm where he’d worked pulled down its website.

Sentencing Due for Ex-Accountant at Pasadena Company in Insider Trading Case [Pasadena Now]
General Finance Corp., a Pasadena-based storage and modular space company, employed Marco Antonio “Marc” Perez as an accounting manager who reported to the company’s chief financial officer. He also performed assignments for the company’s chairman, including printing out the chairman’s emails, prosecutors said. As a result, Perez had access to material information belonging to General Finance, including offers to buy the company, before the information was released to the investing public, evidence shows. In violation of his fiduciary duties to General Finance and its shareholders, and in violation of company policy against insider trading, in March and April of 2021, Perez purchased a total of 66,585 shares of General Finance stock that he was later able to sell for a total of $1.26 million, according to prosecutors.

China adjusts added value accounting to mitigate data manipulation, clean up GDP statistics [South China Morning Post]
China revised its method for calculating the added value of the financial sector to improve the accuracy of gross domestic product statistics in the first quarter of this year – a change cited by many analysts as the proximate cause for April’s contraction in aggregate social financing, the first drop of its kind in almost two decades. The correction was also implemented to aid efforts from financial regulators to prevent capital from idling in the financial system and provide more support for the real economy, they argued.

Watchdog group ‘Truth in Accounting’ questions Jacksonville stadium renovation plan [Florida Politics]
A national group dedicated to honest accounting and citizen education is not sold on Jacksonville Mayor Donna Deegan’s plan for the Jaguars‘ stadium. Sheila A. Weinberg, the founder of Truth in Accounting, says the city is neglecting fiscal realities in favor of speculative and elective spending. “Is it wise to not pay the minimum on your credit cards so you can use the money to pay for a summer house that you may or may not make money on?” she asked. The reference is to a proposal that would see Jacksonville on the hook for $775 million in stadium renovations and $150 million in community benefits, with a $775 million total match ($625 million on the stadium) by the team, though with conditions. The Jaguars, owned by a man worth more than $12 billion, would have 30 years to dole out their $150 million share of the community benefits piece.

U.S. Senate Rejects SEC’s Crypto Accounting Rule But Biden May Veto The Vote [The Defiant]
The U.S. Senate passed a resolution seeking to overturn an accounting rule decreed by the Securities and Exchange Commission (SEC) that could have disastrous implications for financial institutions providing cryptocurrency custody services. On May 16, the Senate voted 60 to 38 in favor of repealing the SEC’s Staff Accounting Bulletin (SAB) No. 121. The resolution, H.J. Res. 109, garnered bipartisan support, with 11 Democrats joining all but two abstaining Republican senators to reject the rule despite Democratic party leaders opposing the resolution. “Limiting the SEC’s ability to maintain a comprehensive and effective financial regulatory framework for crypto-assets would introduce substantial financial instability and market uncertainty,” the White House said in a statement published on May 8. “If the President were presented with H.J. Res. 109, he would veto it.”

Contractor’s dispute over cost-accounting standards has roots dating back 17 years [Federal News Network]
The most shocking part about this podcast is that 2007 was 17 years ago.
Sikorsky Aircraft and the Defense Department have been arguing in court for the past 17 years, over the company’s compliance with cost-accounting standards. One reason it has been running so long is the government keeps asserting violations but takes no action. For more on the importance of this case, the Federal Drive with Tom Temin spoke with Haynes Boone procurement attorney Zach Prince.

Technology

Embracing the GenAI wave: Key insights for tax and accounting professionals [Thomson Reuters]
For accountants, the advantages of GenAI are undeniable. Consider these benefits: Data entry automation. Generative AI systems can automate data entry tasks by extracting information from various documents, such as invoices and receipts. This can reduce the manual effort required for data input while minimizing errors; Tax research and compliance. Generative AI can assist in keeping track of evolving regulatory requirements and ensuring that financial practices comply with the latest standards. This helps in reducing the risk of non-compliance; Document generation and summarization. Generative AI models have the potential to automatically generate financial reports, invoices, or other accounting documents. They could also assist in summarizing lengthy financial statements or reports for quick insights.

Rapid Shifts in Technology, Policies Unite Tax Pros Worldwide [Bloomberg Tax]
In the near future, we can expect more tax administrations will deploy AI to issue opinions, undertake audit actions, and even perform assessments. This is already happening in some highly digitalized jurisdictions. As AI tools become more integrated, taxpayers and the industry around them need to adjust to the experience of interacting with machines. This reality poses new challenges for seasoned professionals and the next generation. For example, what questions should a judge ask when the analysis behind an act of authority didn’t come from a tax inspector, but from software?

Lili Launches Accountant AI to Help Small Businesses Manage Their Finances [PR Newswire]
Grab the , this could be fun.
“Nearly eighty percent of business owners handle their own accounting and finances, which can be a heavy burden to bear on top of managing all the day-to-day operations of a business,” said Lilac Bar David, co-founder and Chief Executive Officer of Lili. “Accountant AI will revolutionize the way business owners interact with their financial data by providing them with quick and more affordable answers to all of their accounting and financial questions. For business owners who cannot afford an accountant or more expensive accounting tools, Accountant AI is a game changer.”

Audit

Taking a closer look at the new PCAOB standard AS 1000 [Thomson Reuters]
The introduction of Auditing Standard 1000 (AS 1000) significantly enhances financial auditing by improving the reliability and integrity of financial reports. AS 1000 updates key auditor responsibilities, emphasizing their role in protecting investor interests with independent reports. It also clarifies engagement partner duties, shortens documentation timelines, and incorporates modern terminology to reflect technological progress in auditing. These improvements aim to ensure the fairness of financial statements and boost stakeholder confidence. Let’s take a closer look at some of the key provisions.

The Serious Questions

The Divergent Accountant [CPA Journal]
Author Anton Lewis, PhD is an associate accounting professor at the college of business at Governors State University in Illinois.
My own personal tale presented above points to a disconnect between what I and other neurodiverse professionals have experienced and the bombast emanating from some large firms with respect to neurodiversity in accounting. Despite the rhetoric of some Big Four firms, the lot of the disabled accountant is a sorry one for many (Duff and Ferguson, 2012; Jiles et al., 2024). From the scant research we have on this subject, it seems isolation is common, and that while accommodations are provided, they are implemented in accordance with the letter of the law rather than the spirit (Duff and Ferguson, 2011). Still, an important question remains: what about the neurodivergent accountant of color? What is their experience at the nexus of race and neurodivergence?

PSA

Y'all need to step up your monitor game pic.twitter.com/4UDkkO5Tec

— Going Concern (@going_concern) May 17, 2024

Talent

Hey window shoppers, take a look at Accountingfly’s top remote accounting candidates of the week. And while you’re here, sign up for Always-On Recruiting to get a fresh batch of candidates in your inbox every week with no obligation to hire. Here’s just one of the many candidates ready to get to work:

• FTE Senior Accountant / Manager | Candidate ID #20346172
• Certifications: QuickBooks Online ProAdvisor
• Education: BS International Business, BS Business Administration
• Experience (years): 20 years accounting experience
• Work experience (detail):
  • Recent 2+ years with a public accounting firm
  • Onboarding new clients, new client set up
  • Cloud accounting for multiple clients
  • Controller level, HR and supervisory experience
• Client niches: Retail, Restaurant franchisees, SMBs
• Tech Stack: QBO, QBD, Hubdoc, Bill.com, Gusto, Expensify
• Remote Work Experience: Y
• Goal: Professional growth, Senior Accountant or leadership role in public accounting

The post Friday Footnotes: Complain About Your Hours, Get Fired; Neurodiversity in the Profession; Pipeline Advisory Group Report Is Here | 5.17.24 appeared first on Going Concern.

Look out, Big 4. AT&T is coming for your recruits:

AT&T Woos Accounting Students, Bypasses Big Four Training Ground

AT&T Inc.’s top accountant is confronting a competitive job market by rethinking the company’s traditional reliance on large CPA firms as a training ground for new hires, taking her recruiting pitch on-campus instead.

Sabrina Sanders, AT&T’s chief accounting officer, is targeting graduate students for the company’s two-year-old, in-house training program. It’s a shift in strategy from the telecom giant’s past practice of hiring alumni from the biggest accounting firms, where young accountants often start their careers before turning to corporate jobs that typically offer higher pay and more predictable schedules.

“With our world rapidly changing, it’s just one of the ways that we’re trying to respond to everything going on across the industry,” Sanders said in an interview with Bloomberg Tax. She’s spent more than two decades at AT&T, steadily working her way up to the C-suite from a role as an accounting manager.

On June 4, Cherry Bekaert is holding a Employee Retention Credit updates webinar. Just want to add this screenshot.

Deloitte inserts itself into some Oregon political drama, an extensive Willamette Week report:

State Invoices Show Oregon’s Favorite Fixer Playing a Key Role in Mopping Up Measure 110

In 2022, Oregon state officials faced a growing mess. Voters had decriminalized small amounts of hard drugs and, on the same ballot measure, directed state officials to funnel hundreds of millions of dollars to new addiction treatment programs. Those Measure 110 treatment dollars couldn’t come at a better time, since fentanyl was rampaging on Portland’s streets.

The problem: That funding wasn’t getting out the door.

So the Oregon Health Authority, the agency in charge of the funds’ distribution, turned to its favorite fixer: Deloitte, the British consulting firm that had previously mopped up the Cover Oregon mess in 2014. (Another consultant, Oracle, was paid $240 million to build an insurance marketplace that didn’t work. Deloitte’s replacement was glitchy, but at least it functioned.) This time, Deloitte sent a team of dozens of young consultants who got to work triaging complaints from fed-up recipients of Measure 110 grants.

WW issued a public records request to review the Oregon Health Authority invoices and found:

[T]he contracts list over a dozen broad tasks, from coordinating community events to staffing phone lines, but offer few details about why the state needed high-priced consultants to do them.

And:

The invoices break down costs by broad topic area and role, which range from “analysts” being paid $245 per hour to top directors earning $395 per hour. The bulk of the work on the behavioral health contract, which was signed in June 2022, went to “business analysts” earning $280 per hour.

EY Canada has named a new Chair and CEO. This is the first I’m noticing the acknowledgement of First Nations peoples in their press release dateline.

Anyway, Alycia Calvert’s CV:

Calvert has been with EY for more than 25 years and a member of the EY Canada Executive Committee for ten years, most recently as the Chief Operating Officer where she was responsible for achieving long-term value and sustainable growth for the Canadian business across service lines, functions and geographies. Previously, Calvert served as Managing Partner for Markets and Accounts, as well as Managing Partner for the Tax practice. In 2018, she was recognized as a Fellow by CPA Ontario.

PCAOB Chair Erica Y. Williams delivered an update on proposed new standard General Responsibilities of the Auditor in Conducting an Audit (AS 1000) this morning:

In order to clarify that the standard’s introductory language does not create any new legal obligation for auditors, we revised the introductory paragraph from what was proposed to clarify that we are expressing a longstanding principle of public accounting — specifically, that the auditor’s responsibility to protect investors transcends the auditor’s relationship with management and the audit committee of the company under audit. We have further clarified that this responsibility provides the foundation for an objective and independent audit.

We moved the requirements addressing the engagement partner’s responsibility for due professional care into a separate paragraph to highlight the important role engagement partners play and to help draw a distinction between the responsibilities applicable to all auditors and those that are incremental for engagement partners.

We included additional clarification that an auditor’s professional skepticism extends to other information that is obtained to comply with PCAOB standards and rules. This would include, for example, information obtained by the auditor from other auditors in a multilocation audit, to comply with the requirements to properly complete Form AP.

Our proposal to clarify what is meant by the phrase “presented fairly” through amendments to AS 2810, Evaluating Audit Results, was not intended to change the auditor’s existing responsibilities for evaluating whether the financial statements are presented fairly in conformity with the applicable financial reporting framework. However, several commenters interpreted the proposed requirements differently. As such, we made changes to address this concern.

And, we are providing a phased-in approach related to the requirement to assemble a complete and final set of audit documentation for retention not more than 14 days after the report release date. This will give smaller firms additional time to comply with the new documentation completion deadline.

The standard: General Responsibilities of the Auditor in Conducting an Audit (AS 1000)

EY pushed out an ad singing the praises of its global alumni network. In it, Trent Henry (EY Global Vice Chair – Talent) says:

I’m always proud to hear of former colleagues finding success in roles outside of EY – and even more so when someone leaves for a role and then returns to us. Like Antonio Lage, who left EY audit practice only to rejoin a few years later and eventually become Latin America’s Deputy Strategy and Transactions Managing Partner and Strategy and Transactions Managing Partner at EY Brazil. Each year, a strong proportion of EY leavers come back to us because we stay in touch and continue to share learnings, better services, connections and experiences — even long after they’ve departed from the organization. In our last fiscal year, more than 16% of our experienced global hires were EY alumni. In the first half of this year, we’re at 15%.

Ye old Big 4 revolving door is still in effect.

PwC’s LA office will soon have a photogenic new managing partner:

Amid broader leadership shuffling and an organizational restructuring, accounting firm PricewaterhouseCoopers has named a new Los Angeles managing partner to lead its 2,000 employees and 160 partners in the city.

Andrew Sofield will replace Stefanie Kane as the accounting firm’s market lead this month. Kane, who helmed local operations for seven years, now leads the firm’s U.S. tech, media and telecommunications strategy.

Sofield, who has resided in Los Angeles for nearly two decades, has been with the firm for more than 14 years. Most recently, he was the U.S. Southwest advisory leader.

Asked about how PwC’s restructuring will affect the LA office he said “I don’t really think it will change too much day to day. Our tax professionals are already serving our clients in the same way that they’re going to continue to serve our clients going forward.”

He doesn’t have a headshot on LinkedIn I can snag so here, take this instead.

This #NationalComingOutDay, learn how PwC’s Andy Sofield and his husband make work; home life work for them: https://t.co/8Qxoqo2XLp pic.twitter.com/lVtNcDbTZL

— PwC US (@PwCUS) October 11, 2017

Also in PwC news, they’ve apparently squashed a rumor that the firm will be pulling out of China:

Regarding the rumors such as “Chinese operations may be suspended,” in the early morning of May 10th, PricewaterhouseCoopers (PwC) issued a statement on its official WeChat account, stating that it had noticed false information about PwC spreading on social media platforms. These false claims falsely stated that they came from official channels within PwC. This information did not come from PwC, and PwC’s trademark was also used without authorization. The content is all untrue information.

PwC stated that it takes this matter very seriously and will deal strictly with unauthorized use of trademarks and fabrication of false information. They have requested relevant parties to delete the related information and will take other necessary actions accordingly.

Seems there’s been a lot of ‘unauthorized’ stuff happening over there lately. See: China Evergrande: PwC refutes letter claiming fraud tied to indebted developer, vows to investigate ‘fabricated’ claims

And one more PwC story. Last week, PwC Australia CEO Kevin Burrowes expressed a desire to move on from the tax scandal that’s been casting a dark, stinky shadow over his firm for more than a year (see: Let’s Brainstorm Shopping Ideas For Underwear Strong Enough to Accommodate This PwC CEO’s Massive Balls). We found this ridiculous and, frankly, ballsy but it’s looking like he might get his wish.

ABC News Australia:

Bureaucrats in charge of the nation’s finances have opened the door to giving scandal-plagued consulting firm PwC Australia new taxpayer-funded contracts by Christmas.

A missive published by the Department of Finance says PwC Australia has agreed not to bid for work until December 1, 2024.

But the news came the same day a company it owns 49 per cent of won more than $700,000 in new taxpayer-funded work.

“It’s a sign that they’re out of the freezer,” says international governance expert Dr Andy Schmulow, who has followed the issues at consulting firms for years.

An update on the Grant Thornton private equity deal from Pitchbook:

Timing is accelerated on the $1.8 billion term loan B for Grant Thornton, and commitments to the deal, originally due May 16, are now due by 5 p.m. ET on Tuesday, May 14, according to sources. No other changes were announced.

Corporate and facility ratings are B/B2, with stable outlooks, and there is a recovery rating of 3 on the loan from S&P Global Ratings. Grant Thornton Advisors, LLC is the borrower on the term loan.

Proceeds from the deal will be used to finance the acquisition of the company by an investor group led by New Mountain Capital. In addition to the TLB, the buyout will be funded with $1.4 billion of new cash equity from the investor group and $950 million of rollover equity, according to Moody’s. The company will have a $375 million revolving credit facility due 2029 with a springing first-lien leverage covenant. The transaction was announced in March and is expected to close in the second quarter.

Forbes wants you to meet America’s Top 200 CPAs 2024. Author Steel Rose, CPA starts the article with a love letter to the protectors of capital markets:

“I have no use for bodyguards, but I have very specific use for two highly trained certified public accountants,” Elvis Presley once said. And who can argue with the man, knowing what we now know about the financial skullduggery of his manager, Tom Parker? Indeed, CPAs are often called upon to fill the role of separating financial fact from fiction. A reliable CPA is a bodyguard for your accounting. And as with a bodyguard, the time to discover that you need one is not when it’s already too late.

This is why Forbes has compiled its inaugural compendium of the 200 finest practicing CPAs in America, following almost a year of research to ensure this selection represents a new standard of excellence for the best in the profession. Indeed, the job of curating the top 200 CPAs from a sea of talent was a task that echoed the very principles on which this profession stands—most of all, a fierce commitment to the staunch independence that delivers reliable financial data, upon which the American economy resides.

That’s all for now, it’s a bit quiet out there as far as scandalous gossip goes. Let me know if you see anything of interest by text or email, don’t worry too much about how newsworthy you think I think it is. My standards are low.

Bye!

The post Monday Morning Accounting News Brief: Details on Grant Thornton’s PE Deal; What Is ‘Presented Fairly’ Anyway? | 5.13.24 appeared first on Going Concern.

Clients Are the Worst

Council holds off on request to hire new accounting firm amid continued questions over city finances [WLBT3]
Some funny back-and-forth drama here.
Nearly eight months after the 2023 fiscal year ended, Jackson, Miss. has yet to bring on an accountant to audit that year’s finances. Council President Aaron Banks says the accountants claim city employees won’t provide the information they need to complete the audits. The city employees say the auditors are hard to work with. “Finance gets you the information, then you ask for the information back a different way, then [Finance] gets you the information, and you ask for the information back again in a different way,” he said. “Instead of just somebody taking themselves over there, sitting down with them, and saying, ‘This is what is needed…’ instead of all this back-and-forth. I’m sick of the crap.” Scott Hodges, a partner with Tann, Brown & Russ Co., said changing auditors won’t fix the city’s financial problems. “The problem is the financial statement draft is not ready, the information has not been provided. It has nothing to do with the audit firm. It has to do with the city’s Finance Department not providing the information,” he said. “You can hire any auditor you want, but the delay would be the same.”

Firm Watch

CLA Expands AI Capabilities with Strategic Acquisition of UK-Based Technology Firm [CliftonLarsonAllen]
CLA (CliftonLarsonAllen LLP), the eighth-largest accounting firm in the United States, today announced its acquisition of Engine B, a next-generation AI-driven, UK-based technology company that specializes in delivering generative AI solutions for the professional services industry, providing deeper insights and opportunities for their clients. This strategic move — CLA’s first global acquisition — underscores the firm’s commitment to harnessing cutting-edge technology to enhance client service and enable CLA professionals to focus more on client engagement, pursuing new business opportunities, and delivering value-added services.

Small Business Pulse: Higher costs prompt Westbrook accounting firm to raise rates [Mainebiz] Higher costs are weighing on the Swanson Group LLC, a Westbrook accounting firm with 33 employees that raised its fixed and hourly rates this year. It expects to do so again in 2025. “We increased our [fixed and hourly] rates by 20% to 25% in 2024, and I suspect we will need to have a similar increase for 2025,” said firm founder Tabitha Swanson. “We have continued to see pricing increases on products/services we utilize this year, and our pay for all staff needs to continue to increase in order to maintain a qualified staff to service our clients properly. Our industry has become more competitive since COVID with the remote worker environment. We are no longer competing only with Maine firms to keep our qualified staff. We are competing nationally.”

Big 4 accounting firm KPMG names first woman to lead Hartford office [Hartford Business Journal]
Big Four accounting and consulting firm KPMG LLP has named a new managing partner of its Hartford office. Susan Jackson will be the first woman to lead KPMG’s Hartford office when she takes over the role on May 15. She will succeed Tom Daugherty, who became managing partner in April 2017. Daugherty will continue to serve as lead partner on one of the firm’s largest insurance industry clients, and maintain his involvement in industry and community organizations, KPMG said.

Columbia accounting firm disciplined for promoting illegal tax scheme [Columbia Missourian] A Columbia accounting firm has been disciplined in federal court for promoting an unlawful scheme that advised clients to sell property and purchase annuities to provide a source of income without paying taxes. The Columbia CPA Group and its owner, Aric Elliot Schreiner, were also ordered to pay $400,000 in “ill-gotten gains” from the scheme. The U.S. District Court for the Western District of Missouri permanently barred Schreiner and five other defendants from promoting, selling and marketing these investment products, called charitable remainder annuity trusts.

Accounting and Advisory Firm Brown Plus Welcomes New Team Members [PRWeb]
Helen Badman joined the Firm as an Employee Specialist. She brings over 20 years of experience, including implementing talent management strategies, conducting workforce planning, optimizing human resources (HR) processes and full-cycle recruitment. She is a graduate of Penn State University. Helen is located at the Brown Plus office in Camp Hill, Pennsylvania. Makaloba (‘Mak’) Barandao joined Brown Plus as an Audit Senior Associate, specializing in accounting and auditing services. Mak earned his Bachelor’s degree in Business Administration in Accounting from Towson University. He is located at the Brown Plus office in Westminster, Maryland.

Practice

Why Mid-Sized Accounting Firm Wealth Management Practices Underperform [Financial Advisor]
For years, many accounting firms have established wealth management practices, and more continue to do so. The aim is, first and foremost, to better serve their clients. Also, the revenues and profits from wealth management are appealing. The complication is that most accounting firm wealth management practices fail to achieve their potential. In a survey of 328 senior partners at accounting firms with 10 or fewer partners who had wealth management practices, 55% reported that these practices were unsuccessful because they failed to meet the firm’s expectations (Exhibit 1). Meanwhile, 31% of the senior partners reported that their wealth management practices were moderately successful, and only 14% said their wealth management was very successful. For more on this study, see Why Few Accounting Firm Wealth Management Practices are Successful.

Let’s Check in on Twitter

interns when there is a catered lunch in the office on a Friday
pic.twitter.com/gZ8Gf6k1nE

— ConsultingHumor (@ConsultingHumor) May 6, 2024

I tried to cancel my Checkpoint subscription on the morning that the new term was supposed to start and they said they’d do it and now denied my request because they said their language was clear that “Renewal orders my only be canceled up until the start date”.

Except this is… pic.twitter.com/V6gMlOcn9B

— Ashley the CPA (@seattle_tax) May 10, 2024

Pricing at tax pro firms is all across the board… Always has been.

That being said you should expect prices to go up 10% a year for sure. Also you should expect to see price increases of more than that from those at the lower end of the pricing scale. https://t.co/tCb9ToiSTX

— Mike Sylvester, CPA (@MikeSyl36625988) May 9, 2024

Tax

Rich Taxpayers In Dark About What IRS Data Was Illegally Leaked [Bloomberg Tax]
The IRS knows little about what specific taxpayer information former IRS contractor Charles Littlejohn stole when he leaked thousands of tax returns—including that of former President Donald Trump and hundreds of billionaires—to news outlets years ago. The IRS told taxpayers last month that their information was compromised, about four years after the historic data leak and four months after Littlejohn was sentenced to five years in federal prison for the crime. Now, the IRS has sent a follow-up letter to those affected who requested more information with details on what the agency knows about the situation. The agency had to wait until the criminal investigation into Littlejohn was complete before it could access which information was stolen. The notification comes amid a wave of uncertainty for wealthy taxpayers who have the option to sue but are hesitating because the damages they’d get in a win are so small. So far, two billionaires have taken legal action.

​​Join the Taxpayer Advocate Service at the 2024 IRS Nationwide Tax Forum​ [Taxpayer Advocate Service]
This year, the National Taxpayer Advocate Erin M. Collins will host Town Halls in Chicago, Orlando, Baltimore, and San Diego, and the Deputy National Taxpayer Advocate Kim Stewart will host one in Dallas/Grapevine. TAS invites tax professionals attending this year’s forum to also sign up and participate in our group sessions on “IRS Online Accounts and Tax Pro Accounts” and “Appeals Alternative Dispute Resolution (ADR).” The knowledge and innovative ideas shared during these discussions help TAS improve taxpayer service on these issues.

IRS boosts health savings account contribution limits for 2025 [CNBC]
The IRS has unveiled the 2025 contribution limits for health savings accounts, which are triple-tax advantaged for medical expenses. The new HSA contribution limit for 2025 will be $4,300 for self-only health coverage, up from $4,150 in 2024, based on inflation adjustments, the IRS announced Thursday. The contribution limit will also increase for savers with family coverage. In 2025, those with family plans can deposit up to $8,550 into HSAs, which is up from $8,300 in 2024.

On Campus

FICPA & Nova Southeastern University introduce cost-free, fifth-year Bridge to CPA program [FICPA]
The Bridge to CPA pilot program, the first of its kind, will give firm employees who have already completed 120 hours of undergraduate education the opportunity to fulfill their remaining 30 credit hours – necessary for licensure as a CPA – through online classes with NSU’s H. Wayne Huizenga College of Business and Entrepreneurship, an institution accredited by the Association to Advance Collegiate Schools of Business. “Through Bridge to CPA, candidates can obtain their fifth year of education and take career-relevant courses, approved for licensure in Florida, without having to worry about tuition costs. These actively employed young professionals will have the opportunity to earn a salary and complete the educational requirements necessary for licensure – all at once,” said FICPA President & CEO Shelly Weir who is also an active member of the American Institute of Certified Public Accountants’ National Pipeline Advisory Group and its Experience, Learn and Earn task force.

NU accounting students participate in CPA case competition [Lockport Union-Sun & Journal]
Accounting students in Niagara University’s Holzschuh College of Business Administration’s cost management systems course presented their case analyses to a panel of academic and seasoned business professionals during a case competition on April 23. The competition, which was sponsored by Lumsden McCormick CPA.

Oxford resident awarded scholarship from the Massachusetts Society of CPAs [Oxford Eagle]
The Massachusetts Society of Certified Public Accountants announced recently that Joseph Szela of Oxford was awarded the MassCPAs Alliance – Silver Scholarship by the MassCPAs Educational Foundation’s 2024 Scholarship Program. Szela, a student at Bentley University, was one of 51 students selected to receive a scholarship. The students were honored for their awards at MassCPAs’ annual, member-wide networking event, Connect 2024, on May 8.

Londonderry’s Minton Recieves CPA Educational Foundation Scholarship [Patch]
The Massachusetts Society of Certified Public Accountants (MassCPAs) Tuesday announced that Samantha Minton of Londonderry, was awarded the Baker Newman Noyes Firm Named Scholarship by the MassCPAs Educational Foundation’s 2024 Scholarship Program. Minton, a student at Bentley University, was one of 51 students selected to receive a scholarship.

News

Solar storms could disrupt communications, make northern lights visible in US this weekend [New York Post]
Citizens of the internet should be aware it could be a buffery weekend.
NOAA has upgraded a geomagnetic solar storm watch from a Level 3 (“moderate”) to a Level 4 (“severe”) as several solar flares have combined. That could grace the northern tier skies with brilliant auroras but also trigger GPS problems, hamper satellite communication, and cause high-frequency radio blackouts. “Watches at this level are very rare,” NOAA stated in the watch. “This is an unusual event.” This is the first “severe” Geomagnetic Storm Watch issued since January 2005.

Deloitte Aids World Economic Forum on Quantum: Q&A [IOT World Today]
The World Economic Forum (WEF) published its Quantum Economy Blueprint earlier this year in collaboration with IBM and SandboxAQ. It aimed to advise organizations and governments on how they can prepare a sound quantum strategy as wider adoption gets closer. A Deloitte team, including global quantum computing lead Scott Buchholz, advised on the report, sharing insights from the company’s experience of working with clients on quantum projects in the field.

‘Big four’ accountancy firms PwC and EY fined over LC&F audit failures [The Guardian] “Big four” accountancy firms PricewaterhouseCoopers and EY have been fined a combined £9.3m for a series of failures in auditing the accounts of London Capital & Finance, the collapsed mini-bond firm that wiped out the investments of thousands of savers. It concludes a near four-year investigation by the Financial Reporting Council (FRC) into how auditors breached their duties while reviewing the firm’s finances in the years leading up to its demise in 2019. Jamie Symington, the regulator’s deputy executive counsel, said the auditors failed to understand the business and raised the possibility that there could be “material misstatements” in the company’s accounts. “These breaches are made considerably more serious by the fact that all of the auditors knew they were auditing an expanding business which was engaged in selling unregulated financial products to retail investors, and that potential investors might place reliance on the clean audit opinions,” Symington said.

Trump Media hires Phoenix accounting firm in wake of SEC charges [Phoenix Business Journal]
On Monday, Trump Media (Nasdaq: DJT) said in a regulatory filing that it had hired Phoenix-based firm Semple, Marchal & Cooper LLP, effective May 4, to replace Colorado-based BF Borgers CPA PC as its independent registered public accounting firm. The move was approved by Trump Media’s audit committee.

China releases interim measures for data security management by accounting firms [Global Times]
China’s Ministry of Finance and the Cyberspace Administration of China have released a series of interim measures for data security management by accounting firms, effective from October 1, 2024, with the aim of standardizing data processing activities, according to an announcement by the finance ministry on Friday. According the announcement, the interim measures are a refinement of the relevant provisions for the national network and data security management in the certified public accountant (CPA) profession, providing a basis for CPA firms to carry out data security management activities.

Talent

If you’re in the market for fresh talent, Accountingfly’s got you. Check out this week’s top remote accounting candidates and sign up for Always-On Recruiting to get a regular batch of candidates like these in your inbox every week.

The post Friday Footnotes: KPMG Picks a Woman to Lead; Auditor Roasts Disorganized Client; PwC and EY Team Up on a Failure | 5.10.24 appeared first on Going Concern.

At the pool and all I can think about is how one CPA did 1,500 fake audits before somebody stopped him pic.twitter.com/gd6ypUjlYh

— Blake Oliver (@BlakeTOliver) May 4, 2024

The situation he was ruminating about when he should have been relaxing: The Securities and Exchange Commission charged audit firm BF Borgers CPA PC and its owner, Benjamin F. Borgers with deliberate and systemic failures to comply with Public Company Accounting Oversight Board (PCAOB) standards in its audits and reviews incorporated in more than 1,500 SEC filings from January 2021 through June 2023.

Last weekend’s weekend discussion: It’s Mental Health Awareness Month. We’re aware. WE’RE AWARE.

Bloomberg Tax drops a scary headline:

End of Trump Media’s Auditor Jolts Hundreds of Other Companies

The sudden shutdown of what the SEC dubbed a “sham audit mill” will force hundreds of companies, including Trump Media & Technology Group Corp., to hunt for new auditors, scour old audits for potential problems, and scramble to meet public company regulatory deadlines.

Borgers had clients ranging from American Rebel Holdings Inc., a Nashville-based business that makes apparel and backpacks for concealed carry guns, to Eva Live Inc., an AI-focused digital advertising company in California.

All of them will need to find new auditors—fast—if they want to make their next quarter’s financial reporting deadlines in time. They have to alert the market that they no longer have an auditor by issuing a special 8-K financial form and will brace for scrutiny as new auditors question the work vetted by a firm that federal regulators said violated multiple rules.

“This will likely shut down a lot of companies, or make them go private,” said Shaun Donnelly, CEO of mixed martial arts entertainment company Lingerie Fighting Championship Inc., a BF Borgers client.

Reminder to clients: You might have a hard time finding a new audit firm:

Maine’s BerryDunn (#46 on the IPA Top 500 with $137,885,236 in revenue) is getting sued:

Around 1.1 million people who use BerryDunn’s services were affected by the breach, according to eight lawsuits filed in U.S. District Court in Portland on Tuesday. An “unauthorized actor” took data stored on a vendor’s server, but BerryDunn said there is no evidence personal information was misused, in the letter.

The lawsuits allege, in part, that BerryDunn was negligent, breached its fiduciary duty and was unjustly enriched. BerryDunn “failed to properly implement basic data security practices,” which is prohibited by federal law, according to the lawsuit.

Customers were told about the breach in late April, seven months after it happened. The notification followed an investigation by BerryDunn, according to the letter.

While that’s going on, BerryDunn and their vendor Reliable Networks are playing hot potato with whose fault it is:

BerryDunn, a prominent Portland accounting firm, says one of its vendors, Reliable Networks of Biddeford, got hacked. Reliable Networks says it was hired to manage BerryDunn’s health care data, not secure it, and that it spotted the hack of BerryDunn’s network.

“The investigation found that an unauthorized actor gained limited access to the vendor’s network and took some data,” BerryDunn said on its website.

Reliable fired back on its website: “BerryDunn’s own network and system were breached by a third party, through no fault of Reliable Networks.”

The company blasted BerryDunn for its “baseless allegations” and said it was confident that once forensic analysis was complete, its claims would be found “devoid of any merit whatsoever.”

Quick update to last week’s BDO lawsuit story: We’re told there has been discussion among partners about a class action suit. Fun!

UK regulators have published their strategies for the regulation of artificial intelligence (AI) within financial services. “No new regulations needed.”

KPMG:

Overall, [regulators] have welcomed the government’s sector-led and innovation-friendly approach. No new regulation is proposed, with both the BoE/PRA (Bank of England/Prudential Regulation Authority) and FCA (Financial Conduct Authority) determining that they already have appropriate frameworks in place to support the government’s principles. However, they have acknowledged that this will need to be kept under review given the rapid growth in deployment of AI within financial services. As a result, firms should take action now to ensure that their AI risk management tools are fit-for-purpose and fully incorporate the requirements that have been identified.

The Australian government is still going after Big 4 firms, Financial Review has a list of concerns from the Regulation of Accounting, Auditing and Consulting Firms in Australia report released Friday:

The big four accounting firms could be forced to slash partner numbers and incorporate their consulting businesses under a crackdown on governance standards flagged as a possible response to the PwC tax leaks scandal.

In a consultation paper released late on Friday, Treasury also raised concerns about audit and consulting partners sharing profits, which it said risked auditors being incentivized to prioritize client satisfaction over audit quality, potentially undermining market confidence.

Apparently PwC’s Phillippines affiliate is caught up in some nonsense. First I’m hearing of it.

The Securities and Exchange Commission has accused Isla Lipana & Co., the Philippine unit of the world’s second-largest accounting giant PwC, of colluding with self-styled trading wizard Mica Francesca Tan in luring investors into her multi-billion peso Ponzi-style investment scam.

The complaint filed by the SEC with the Department of Justice, a copy of which was obtained by Bilyonaryo.com, highlighted that Isla Lipana’s questionable audit reports for Tan’s MFT Group of Companies from 2018 to 2021 played a pivotal role in supporting Tan’s fraudulent scheme to drain funds from the investing public.

Tan attracted investors with assurances of annual returns between 12 percent and 18 percent, which included monthly payments of 1 percent to 1.5 percent throughout the year, culminating in the final month with the return of the principal amount.

She used the audited financial statements (AFS) certified by Isla Lipana to “perpetrate the unauthorized offer or sale of unregistered securities,” according to the SEC.

BTW that’s their SEC, not ours.

The Times of Israel on what Deloitte’s working on over there. Including the screenshot to ask where can we get that pillow? Also the insert needs to be bigger than the cover for maximum fluff, just saying.

“The past year has been challenging and founders are showing real resilience,” Yair Laron, partner at Deloitte Catalyst, told The Times of Israel in emailed comments.

Deloitte Launchpad is a seven-week hybrid program that provides early-growth startups with hands-on mentorship from the firm’s Israel and global experts. The 10 startups were chosen out of about 100 applicants for the growth accelerator.

The program, which includes online and in-person meetings with investors and experts, both in Israel and at Deloitte’s offices in New York, seeks to help nurture early-stage growth startups that are looking to grow their footprint and expand to the US market.

“Amid war, Deloitte kicks off 7th cohort for Israel startup accelerator program,” The Times of Israel May 5, 2024

What kind of calculator is this?

ZDNet on an EY cybersecurity survey released today:

Cybersecurity threats have always been a top-of-mind concern for professionals, but a new report suggests recent technological advancements have caused the fears to reach new heights. On Monday, EY revealed the results of its 2024 Human Risk in Cybersecurity Survey, which gathered insights from 1,000 employed Americans across public and private sectors on cybersecurity awareness and practices.

Cybersecurity is constantly evolving, as attackers adopt new techniques and defenders adapt to counter them. Over the past year, artificial intelligence (AI) developments have advanced cybersecurity attacks, accelerating the pace of this cat-and-mouse game.

The study found that working professionals are aware of these changes, with 85% of respondents believing AI has made cybersecurity attacks more sophisticated and 78% saying they’re concerned about the use of AI in cyberattacks.

The study also found that 39% of employees do not feel confident about using AI responsibly. Employees are looking for their companies to take action to help build their confidence in using AI tools.

See more from EY: How AI is igniting cybersecurity fears in workers

Oh lordt, they’re coming for nature.

KPMG Report: Is it Time to Make Biodiversity an Asset Class?

KPMG is making the case for scaling up business investment in nature by making biodiversity officially an asset class.

In a report called The Investment Case for Nature, it says the current annual global spend on biodiversity is US$166bn – one sixth the amount required per year by 2030.

It calls for work to create incentives – including making biodiversity a separate asset class – and to harness data and tech.

The report, led by Sarah Nelson, KPMG Global Coordinator, Nature & Biodiversity, says: “It involves recognizing and valuing biodiversity and ecosystem services in a way that enables them to be traded or invested in, similar to traditional financial assets.

“It can help to mobilize and make biodiversity investments more visible.”

Sure, we trust you.

Meanwhile, in IB:

An associate at a US investment bank is understood to have passed away after allegedly working 120-hour weeks on a deal in the Financial Institutions Group (FIG) sector.

Various social media posts claim that the associate concerned had a wife and child and joined the bank through the Veteran’s program having previously been a green beret. Unsubstantiated social media posts claim that he worked 120 hours a week for four weeks running and drank energy drinks to stay awake. The claims have not been validated and the cause of death is not known. Claims that he died of overwork are speculative.

Daily Beast with a reminder not to keep written records that might incriminate you later:

Emails Reveal Top Trump Accountant Had Secret Campaign Role

As Donald Trump’s first criminal trial moves through its second week of testimony, the prosecution is calling witnesses that can attest to Trump’s personal involvement in the underlying crime that the case is built on—but one witness won’t be at their disposal, and documents obtained by The Daily Beast suggest that he could provide pivotal information about that very crime.

That witness is longtime Trump Organization financial controller Allen Weisselberg, a convicted tax cheat whose perjury plea deal earlier this month reportedly took his testimony off the table. But while Weisselberg’s personal testimony may not be key, he left behind a potentially priceless paper trail.

The prosecution has already highlighted Weisselberg’s central role, saying that they will present the accountant’s handwritten notes documenting the allegedly fraudulent reimbursement scheme that Trump is charged with carrying out. But other documents obtained by The Daily Beast suggest that Weisselberg was in a unique position among the other witnesses—not only was he handling the Trump Org’s books, he was also apparently advising the campaign at the same time.

Federal Election Commission records don’t show any campaign payments to Weisselberg, however, raising the prospect that Trump’s right-hand man may himself have made unreported contributions in the form of services for his 2016 bid.

That’s enough of that. Be good, be kind to yourself, and remember to get your 8-10 glasses of water in. Please let me know if you see anything of note, don’t worry if I’ll find it newsworthy or not.

The post Monday Morning Accounting News Brief: Big 4 Better Be Ready to Get Regulated Hard; A Firm Playing Hot Potato With a Data Breach | 5.6.24 appeared first on Going Concern.

That PwC Thing

Senate caravan not moving on from PwC [The Mandarin]
Accounting firm PwC Australia has still a lot of work to do before it can move on from the tax leaks scandal, according to two members of a Senate committee looking into government procurement. Senators Richard Colbeck, the chair of the Senate’s financial and public administration committee, and Barbara Pocock told The Mandarin that PwC cannot move on until a range of matters are concluded, such as the nine cases linked to the tax leaks saga being looked at by the Tax Practitioners Board and the Project Alesia investigation by the Australian Federal Police. Their remarks come after PwC chief executive officer Kevin Burrowes told The Australian Financial Review last week that he wanted to move on from the tax leaks saga. Burrowes’ first major media outing coincided with the firm announcing a new strategic plan to recast the firm’s focus on audit, tax and deals, risk and transformation, and cloud and digital.

Burrowes wants everyone to move on from PwC’s tax scandal [Australian Financial Review]
On that note…
PwC chief executive Kevin Burrowes says it is time to draw a line under the damaging tax leaks scandal that has plagued the big-four firm, while conceding the task of restoring its tattered reputation will take years. After a horror period in which PwC was blackballed from lucrative federal government contracts, forced to hive off its 100-partner public sector consulting business for $1 and lost another 200-odd partners, Mr Burrowes said he was confident “enough progress” had been made to begin rebuilding. “We feel we’re in a good position now to start to turn to a new chapter, look to the future and drive the firm with a new strategy,” he said.

Related:

Consultation commences on regulation of the tax and accounting sectors [The Treasury (Australia)]
The Government is acting to rebuild resilience and confidence in our tax and accounting sectors. Treasury has today released two consultation papers on the adequacy of current settings. The PwC tax leaks matter exposed the fragmented nature of current regulatory settings. The current frameworks provide insufficient governance and transparency to incentivise good corporate behaviour, and insufficient ability for our regulators to identify misconduct. The first paper seeks views on the regulations for accounting, audit and consulting firms that keep our capital markets strong, including: governance and transparency requirements; managing conflicts of interest; whether there is sufficient competition and resilience in the sector; whether enforcement is strong enough. The second paper invites views on stronger information gathering powers for the Australian Taxation Office and the Tax Practitioners Board to support investigations into misconduct against the tax and super systems. It is critical that our tax regulators are equipped to detect, respond to, and deter the type of conduct that occurred in the PwC tax scandal.

Practice

The PCPS CPA Firm Top Issues Survey is open! [AICPA via Twitter]
Link to the survey on Qualtrics
The past few years have brought unprecedented change to accounting firms. Many firms are seeing increased demand for their services and are navigating hybrid/remote teams, rapidly changing technology and are looking to hire more staff. Do your top challenges align with those of your peers? The AICPA’s Private Companies Practice Section (PCPS) invites staff and partners at public accounting firms to share their outlook on key firm practice management issues in this 10-minute survey. Your answers can help guide the development of PCPS practice management resources designed to assist firms in meeting the ever-changing accounting firm landscape.

Reasons for the Acute Talent Shortage in Accounting [Accounting Talent Podcast]
Join host Rob Brown and co-host Jeff Phillips, CEO of Padgett and Co-Founder of Accountingfly, on the Accounting Talent Podcast as they tackle the burning question: Is accounting doomed due to a talent drought? Together, they dive into the nitty-gritty of the talent shortage in accounting firms, offering hope and actionable solutions.

Lakehouse is CANCELED

Advisory Learning @ Lakehouse sessions canceled for the rest of the FY
byu/markmano33 inKPMG

Layoffs imminent?
byu/Affectionate-Try-224 inKPMG

India’s Up to Something

It’s raining jobs at Deloitte for freshers and experienced techies in new office locations [TechGig]
This is basically an ad but let’s keep it in mind if Deloitte starts going hard on layoffs.
Deloitte opened its Bengaluru Office this month, hosting 6,000 people, servicing worldwide customers, and promoting regional development. The new Bengaluru office, launched by Deloitte US Chair Lara Abrash, will focus on AI, data analytics, cybersecurity, and cloud services with an XR Studio and Innovation Labs. Deloitte added Bengaluru, Noida, and Pune to its 14 Indian operations, including Bhubaneswar, Coimbatore, Kochi, and Jamshedpur, in March. Deloitte said in January that its AI Academy will teach over 120,000 people and spend $2 billion in technology learning to improve AI and associated capabilities.

ICAI passes order against three EY affiliates, retired partner for ‘professional misconduct’ [Business Today]
Curious case out of India, the regulator there ordered several EY affiliates to sever their arrangements with the global EY body.
The Institute of Chartered Accountants of India (ICAI) has passed an order against three affiliates of auditing major EY and a retired partner for “professional misconduct”. It has passed an order against another firm and its partner for similar reasons. The ICAI committee stated that joining the international entity and agreeing to its contents provided for referral work and payment of fee, constituted ‘professional misconduct’. “The committee is of the view that visiting cards contain information which signify virtual address relating to Ernst & Young (international entity) and further email id used by the respondent firm depicting its close association and/ or linkage with the international entity. The respondent firm/ respondent have failed to point out as to how they were able to maintain their independence when the domain that was being used belonged to the third party i.e. multinational entity,” as per the order issued in the case of S V Ghatalia & Associates, LLP.

India’s answer to Big Four firms could be in the works: Here are the details [Business Today]
Is India conspiring to merge its 96,000 firms into a handful of mega firms that can compete with Big 4? It looks that way.
Can India have a home-grown mega sized CA firm that can go global and compete with the Big Four firms? It may be in the works. The Institute of Chartered Accountants of India (ICAI) and the Ministry of Corporate Affairs are laying down the ground work for this. “We have made a Committee for Aggregation of CA firms. It is working very effectively on how to frame guidelines for networking, multidisciplinary partnership, international networking, merger and demerger and advertisement. We are working on these five fronts so as to empower Indian firms to become global,” said ICAI President Ranjeet Kumar Agarwal.

Technology

AI and fraud: What CPAs should know [Journal of Accountancy]
With AI, criminals can generate deepfake voicemail or video messages from the CEO — or even live deepfakes of the CEO’s voice or video. That’s a next-level threat, but new types of fraud may not even be the biggest risk for CPA firms and other potential targets. The fear is that AI can help criminals automate old fraud schemes, increasing the speed, efficiency, and persistence of the attacks. In fact, it’s already happening. The FBI, through its Internet Crime Complaint Center, has since at least 2020 alerted the public to the risk of AI-driven scams.

The ABCD+ of technology: AI and automation [ICAEW Insights]
It’s easy to think of artificial intelligence (AI) as new technology, but it’s been around for a long time – and most of us are already using it, whether that’s Alexa, planning a journey with Google Maps or following recommendations on Netflix. With the launch of ChatGPT OpenAI’s free-to-use chatbot, at the end of 2022, however, “AI has become more accessible and a bit more real, because you can interact with it in a slightly more humanlike way,” explains Ian Pay, Head of Data Analytics and Tech at ICAEW.

Who Takes a Risk on New Technology? [Kellogg Insight]
This academic research focuses on Hollywood but the understanding gleaned from it can easily be applied to the next generation of CPAs and firm owners.
The movie “Sky Captain and the World of Tomorrow” was released in 2004. “Me and You and Everyone We Know” came out the following year. There is little that these movies share. The former is a steampunk sci-fi adventure that takes place in a technologically advanced version of 1939; the latter is a rom-com. But they do hold two facts in common: they were directorial debuts, and they were shot with digital cameras. Digital cameras were relatively novel technologies at the time—the overwhelming majority of directors still used film—but they were starting to appear on the scene. For Filippo Mezzanotti, an associate professor of finance at Kellogg who studies technology adoption, this moment presented an uncommon research opportunity, in part because the decision about which camera to use is generally made by a single person: the director.

Deloitte Rolls Out Generative AI Concierge Tool for Public Sector [ExecutiveBiz]
The company said Tuesday it uses Google’s multimodal AI model called Gemini to power the Elevating Digital Government Experiences platform to employ multi-lingual, channel-agnostic and intuitive conversational capabilities.

Aren’t We Already Painfully Aware?

May is mental health awareness month [Deloitte Health Forward blog]
By Deloitte US Chair Lara Abrash
It is unrealistic to expect everyone to have a perfect day, every day. And professionals who are not adequately supported in their mental health might go through periods where they are unable to bring their best self to work. In those circumstances, there are often several factors at play that may require time and care outside the workplace. When such situations arise, it is important that people feel supported in seeking the professional help they need. I have found that leaders and teams can be critical catalysts in creating environments within the workplace where people feel comfortable showing up as their authentic selves. This can make them more willing to share their challenges and embrace psychological health resources. It starts with authentic leadership.

Mergers & Acquisitions

Nuvalence joins EY, expanding digital engineering and generative AI capabilities [PR Newswire]
Ernst & Young LLP (EY US) on April 29 announced Nuvalence, a technology consultancy, has joined EY US to accelerate the delivery of platform engineering, product development and generative AI (GenAI) platform-enabled services to organizations across industries and sectors. Nuvalence brings EY a seasoned team of over 140 engineers, product managers, and architects from across the US, Canada and Colombia.

Ronald Blue & Co. CPAs to join CLA on May 1 [PR Newswire]
CliftonLarsonAllen announced on Wednesday that Ronald Blue & Co. CPAs’s 80 staff and eight partners intend to join CLA on May 1, 2024.

Wipfli acquires assets of Harbour Results, adds associates [Wipfli]
Wipfli had an acquisition of their own to announce on Wednesday, revealing it entered into an agreement to acquire certain assets of manufacturing consultants Harbour Results.
Harbour Results is a trusted advisor in the manufacturing industry, providing benchmarking, assessments, strategic development and operational improvements to more than 60 clients. The Harbour Results team will bring to Wipfli its proprietary benchmarking service, which delivers data that drives strategy and operations for manufacturers. The transaction, effective May 1, adds more than 60 clients to Wipfli’s 60,000.

CPA Exam

Reminder, some CPA license fees are going up in California this summer. Details in the CBA UPDATE newsletter here:

Issue #101 of the UPDATE newsletter is available! Page 9 features an interview w/ CBA President Joseph Rosenbaum, CPA, discussing his experience in the profession, his advice to young graduates just starting their career, and how the CBA is helping to grow the pipeline. … (1/2) pic.twitter.com/cV4NmeFZLz

— California Board of Accountancy (@CBANews) May 1, 2024

Talent

Accountingfly has a fresh new batch of top quality accounting professionals for hire! Browse their profiles below and sign-up for Always-On Recruiting to get great candidates like these in your inbox weekly with no obligation to hire.

News

PCAOB Announces Agenda for May 9 Meeting of Its Standards and Emerging Issues Advisory Group [PCAOB]
The Public Company Accounting Oversight Board (PCAOB) will hold a meeting of its Standards and Emerging Issues Advisory Group (SEIAG) on Thursday, May 9, 2024, at 9:00 a.m. ET. The public may view the meeting via a livestream on the PCAOB’s event page, and a recording will be available on that page after the meeting concludes.

Deloitte acquires public health research firm [Washington Technology]
By purchasing Gryphon Scientific, Deloitte is looking to bolster its ability to work with federal and other government agencies on using AI and other data-centric tools to detect and respond to infectious diseases. Terms of the transaction announced Monday were not disclosed. Gryphon employs a team of scientists, programmers, and policy and planning specialists with experience in areas such as data science, scientific communications, modeling and risk assessment.

EY promotes deputy to GC as global legal chief announces retirement [The Global Legal Post]
Big Four accounting firm EY has named David Weintraub as its next global general counsel and vice chair, replacing current GC Michael Solender who is retiring at the end of June. Weintraub has been with EY since 2010 when he joined as US deputy GC before becoming global deputy GC in 2014.

Education

Accounting firms were ahead of the curve on this. https://t.co/fb5juA0QTb

— Going Concern (@going_concern) May 1, 2024

The post Friday Footnotes: Look What You Did, PwC; No Lakehouse This Year; India Wants Its Own Big 4 | 5.3.24 appeared first on Going Concern.

Also want to include this link from Footnotes in case you missed it, we’ll do a full story later: PIPCA Survey Sheds Light on What Existing CPAs Want and Why Some are Leaving [INSIDE Public Accounting]

The report is found here: CPA Talent Retention 2024: Keeping Your Best Performers

And now new news.

You’ve no doubt heard by now that non-competes are no more. This could be bad news for firms, especially the sue-happy ones that strongly discourage people from striking out on their own.

NPR:

The Federal Trade Commission narrowly voted Tuesday to ban nearly all noncompetes, employment agreements that typically prevent workers from joining competing businesses or launching ones of their own.

The FTC received more than 26,000 public comments in the months leading up to the vote. Chair Lina Khan referenced on Tuesday some of the stories she had heard from workers.

“We heard from employees who, because of noncompetes, were stuck in abusive workplaces,” she said. “One person noted when an employer merged with an organization whose religious principles conflicted with their own, a noncompete kept the worker locked in place and unable to freely switch to a job that didn’t conflict with their religious practices.”

These accounts, she said, “pointed to the basic reality of how robbing people of their economic liberty also robs them of all sorts of other freedoms.”

The FTC estimates about 30 million people, or one in five American workers, from minimum wage earners to CEOs, are bound by noncompetes. It says the policy change could lead to increased wages totaling nearly $300 billion per year by encouraging people to swap jobs freely.

“U.S. bans noncompete agreements for nearly all jobs,” NPR April 23, 2024

We’re working on a story, stay tuned. Also, anyone with a public accounting non-compete story — the messier the better — is encouraged to get in touch to share their experience anonymously.

On the topic of non-competes, a Forbes contributor who’s been to Deloitte University says there’s a better way to keep good talent and it’s not the threat of legal action if they leave.

Provide people with the ability to grow their careers where they’re planted. In the old days, companies used to offer management training programs. You started in an entry-level role and were given the opportunity to work in different departments. You attended special training sessions to ensure you were prepared for additional responsibility. Along the way, you were given a bump in salary and title.

Management training programs are a thing of the past. Or are they? Companies like Abbott give new hires the opportunity to participate in a two to three-year development program, which includes exposure to six different areas of focus. Amid a recession, former CEO of Deloitte, Barry Salzberg made a bold move and invested $300M in Deloitte University, a learning center dedicated to providing employees at all levels of the organization with learning opportunities. I’ve had the privilege of teaching at Deloitte U and can attest to the fact that it’s a pretty amazing place.

Deloitte announced another huge investment in Deloitte U last year.

Chicken chain Bojangles is suing an accounting firm.

Bojangles Restaurants Inc. and Bojangles Opco LLC have filed a lawsuit alleging proprietary and confidential information was wrongfully shared by its largest franchisee organization and an accounting firm.

The Charlotte-based chicken-and biscuits chain claims in a court filing that Bojangles’ of America Franchisee Association and Berkowitz Pollack Brant has caused irreparable harm to the company.
Bojangles lawsuit counters one filed by Bojangles’ of America Franchisee Association in March that alleges breach of contract and unfair and deceptive trade practices. That lawsuit was filed over money BFA members have been paying into a marketing fund — and a separate account they say was kept secret for years.

But, Bojangles says that filing has allowed its competitors, suppliers, competitors and the public access to confidential information. It alleges the confidential information shared publicly included amounts franchisees contribute to an accrual fund, dollar amounts of product write offs, amounts paid to vendors from a marketing fund and administrative fees charged.

Bojangles claims that franchisee group Bojangles’ of America Franchisee Association, bound by a non-disclosure agreement, shared confidential information with Berkowitz Pollack Brant of Miami (#61 on INSIDE Public Accounting’s Top 100, $104,938,677 in revenue). The franchisees hired the firm “to review information and documents regarding marketing and accrual funds to which franchisees contribute.”

When Bojangles got sued, this confidential information made its way into the public record. So it’s a whole thing now.

Someone about to inherit their parents’ accounting firm asks r/asksingapore how to be a good boss.

How to be a good boss?
byu/Awkward_ninjapanda inaskSingapore

Text:

Hi all, this is my first post on Reddit. As per the title, I have been wondering what does it take to be a good boss to my staff. Background story, I manage a small accounting firm, we help SME with their accounts. This is a family-run business, meaning my parents are retiring soon. My colleague and I are next in line for succession to manage the company together. Would like to hear some thoughts on this.

Because it’s asksingapore and not r/accounting, the answers are not jokey and actually helpful. Check it out.

Facebook co-founder Dustin Moskovitz has invoked the dreaded Enron comparison against Tesla. I trust this audience does not need a brief explainer on what Enron is and why a business doesn’t want to be compared to it.

Dustin Moskovitz, the Facebook cofounder who later went on to start Asana, claimed in a Threads post on Wednesday that the EV maker has misled consumers “on a massive scale,” accusing Tesla of lying about its Full-Self Driving software and the vehicle’s ranges.

Spokespeople for Tesla and Asana did not respond to a request for comment.

Elon sure did tweet about it though!

I’d like to apologize to Dustin Moskowitz for calling him a “retard”. That was wrong.

What I meant to say is that he is a pompous idiot whose his head is so far up his own ass that he is legally blind.

I wish him the best and hope that someday we can be friends.

— Elon Musk (@elonmusk) April 26, 2024

You’d think at quick glance this Deloitte case study is about douchebags working at Deloitte.

It’s not.

Tech news from KPMG:

Quantum is coming — and bringing new cybersecurity threats with it

Most businesses surveyed are “extremely concerned” about quantum computing’s potential to break through their data encryption. Sixty percent in Canada and 73 percent in the US believe “it’s only a matter of time” before cybercriminals are using the power of quantum to decrypt and disrupt today’s cybersecurity protocols. At the same time, however, 62 percent in Canada and 81 percent in the US admit that they need to do a better job of evaluating their current capabilities to ensure their data remains secure.

KPMG Australia research shows that protecting data and dealing with cyber risks is viewed by C-suite executives and board members from private sector enterprises as a top challenge in 2024 — and for the next 3 to 5 years.

KPMG in Germany conducted research in collaboration with Germany’s Federal Office for Information Security (BSI), 95 percent of respondents believe quantum computing’s relevance and potential impact on today’s cryptographic security systems is “very high or high,” and 65 percent also say the average risk to their own data security is “very high or high.” Yet only 25 percent of firms say the threat posed is currently being addressed in their risk management strategy.

Across the pond, KPMG and a former partner are in court.

One of the Big Four consultancy firms, KPMG, and its former partner have been hit with legal action by bankrupt Manchester-based property developer Bashar Issa.

KPMG and former partner David Costley-Wood have been named on a claim listed in the High Court.

According to the particulars of the claim document, as seen by City A.M., Bashar bin Mahmood (known as Bashar Issa) owned several property development companies. However, in 2008, he instructed KPMG to assist with restructuring his business after the Irish Bank Anglo Irish Bank (AIB) went into bankruptcy.

The claimant had a £89m loan with AIB to develop a housing and mixed-use property.

The claim noted that Costley-Wood was a senior manager at KPMG and had introduced the claimant to the firm’s employees under his management.

David Costley-Wood (great name, that’s what happens when your dick gets you in trouble) has been in these pages before:

PwC Australia announced a new three-year strategy on Friday that prioritizes four new key market areas: artificial intelligence, trust in what matters, climate, and business model reinvention.

Good plan, AI is notorious for being responsible with confidential information.

PwC Australia has also outlined its ongoing focus on being a well-managed firm, for example, by having a market relevant operating model, leading governance, risk and ethics, and responsible business practices. Building a leading culture is also emphasised as a key driver for the firm to deliver its purpose.

PwC Australia CEO Kevin Burrowes said business reinvention is needed to truly support clients facing rapid disruption.

“We are excited for the opportunity to create better outcomes for our clients and people as we launch this strategy,” he said.

Another accounting firm has reported a data breach.

On April 25, 2024, Berry, Dunn, McNeil & Parker, LLC (“BerryDunn”) filed a notice with the Attorney General of Maine after discovering that a managed service provider of BerryDunn’s Health Analytics Practice Group (“HAPG”) experienced a data breach. In this notice, BerryDunn explains that the incident resulted in an unauthorized party being able to access consumers’ sensitive information. Upon completing its investigation, BerryDunn began sending out data breach notification letters to all individuals whose information was affected by the recent data security incident.

HAPG uses a managed service provider called Reliable Networks of Maine, LLC, Reliable detected suspicious activity within its IT network and informed BerryDunn of this on September 14, 2023.

In response, BerryDunn launched an investigation with the help of third-party data security specialists.

Ultimately, through this investigation, BerryDunn confirmed that an unauthorized party was able to access Reliable’s network and removed certain data from HAPG’s systems.

K that’s it. Get at me about non-competes and have a great week, everyone!

The post Monday Morning Accounting News Brief: Deloitte University vs. Non-Competes; Elon Doesn’t Take Getting Compared to Enron Kindly | 4.29.24 appeared first on Going Concern.

Big 4

KPMG hires ex-prisoners as part of Gov strategy to tackle £18bn reoffending cost [City A.M.]
One of the Big Four firms, KPMG, has become the first white-collar British business to employ former prisoners as part of the government’s new pilot programme. The Big Four firm has employed its first cohort of prison leavers in a range of different roles, including technology development. Its part of a campaign by the Government urging the UK’s biggest businesses to recruit prison leavers as part of in order to reduce reoffending as well as growing the economy. According to the Ministry of Justice (MoJ), the vision is that this campaign will help fill some of the estimated 1m vacancies in the UK job market and it’ll also “keep former offenders on the straight and narrow”.

Hmmm…

PwC All-Hands Call [Tipline]
We didn’t get a chance to write this up this week, here’s an update on PwC’s all-hands.

PwC picks consultant Marco Amitrano as next UK senior partner [Financial Times]
PwC’s partners have elected consultant Marco Amitrano to lead one of Britain’s largest professional services firms, after a three-way race that included female candidates on the shortlist for the first time. The firm said on Thursday that Amitrano would become the firm’s next UK senior partner after triumphing in a partner vote against audit boss Hemione Hudson and tax leader Laura Hinton. Amitrano, a PwC lifer who currently serves as the firm’s head of clients and markets, will take over from outgoing boss Kevin Ellis on July 1.

An alternative take on the above news:

PwC picks only man on shortlist to be next boss [The Telegraph]
Partners overlook female candidates to maintain 175-year-long male-led streak.

Oops

Trump Media’s auditor is really bad at spelling his own name [FT Alphaville]
Ben F Borgers, whose accountancy firm BF Borgers inspects the finances of Trump Media & Technology Group, has filed Form APs to the US Public Company Accounting Oversight Board using the names Ben F Brogers, Blake F Borgers, Ben F Vonesh and Ben F orgers, among 10 others — some of which look like simple spelling mistakes — according to Public Company Accounting Oversight Board data. Orthographically-challenged auditors are relatively rare. One other US auditor has used nine variations of their name and another two have used eight different spellings. The vast majority spell their names consistently.

Education

“Almost Unstoppable”: WVU Accounting Helps Students Succeed [West Virginia University]
It’s basically an ad but whatever.
“I’ve always liked math,” said Claire Ullom. “My dad said, ‘You’re a great people person. I really think if you enjoy math and are good with people, you should consider accounting.’” That conversation marked the beginning of Ullom’s accounting journey. Her journey isn’t over yet, though – five years later, Ullom has notched an undergraduate degree, an internship and a job offer with a Big Four accounting firm. Soon, she’ll have a graduate degree to go along with the rest of it.

First-gen La Salle accounting student moving onto role at PwC following graduation [LaSalle University]
Wait, is this an ad too?
Cagatay Ozbay, ‘24, who is an accounting major and finance minor is proud of all he’s accomplished—and overcome—as a student. “One thing I would like to say is, no matter how difficult it gets, if you have a goal and the discipline you will always succeed,” the Delran, N.J., resident said. “That is what got me here today. The discipline is what has made me the man who I am today.”

Talent

If you’re looking to add to your remote workforce, check out Accountingfly’s top remote accountants and auditors of the week. If none of these strike your fancy, sign up for Always-On Recruiting to get a fresh batch of professionals in your inbox every week for FREE.

Deloitte: ‘You don’t need to be perfect; you just need to start’ disability inclusion work [UNLEASH]
“We want everyone to feel they can be themselves and to thrive at work – in every country where we operate, in everything we do, every day,” Kay Forsythe, Senior Advisor, ESG Advisory at Deloitte UK, tells UNLEASH. At the end of the day, “if we enable people personally, professionally to be their best, we get much better outcomes, as do our clients”, adds Forsythe. This explains why diversity, equity, inclusion and belonging is a “business priority” for US$65 billion-revenue professional services giant. “We know that this vision can only be achieved by providing a workplace culture that is always inclusive, underpinned by respect and appreciation for diversity in all its forms,” she continues.

The post Friday Footnotes: KPMG Hires Ex-Prisoners; Notes From PwC’s All-Hands; Why CPAs Are Leaving | 4.26.24 appeared first on Going Concern.

Sunday Times did a whole big piece on how EY’s failed break-up caused a year of resentment:

After five tumultuous years as the global head of EY, Carmine Di Sibio is finally having some fun. Last week, the retiring Italian-born American jetted off to the firm’s towering Tokyo offices as part of his farewell tour. While there, the 61-year-old was treated to a Ken-shibu, a traditional Japanese sword ritual carried out by a highly skilled martial artist.

“A retirement celebration that I’ll carry with me forever,” the sports fanatic told his 300,000 followers on LinkedIn.

Carmine’s post:

The aftermath article goes on:

Schmoozing the firm’s Japanese partners alongside Di Sibio was his successor, Janet Truncale, the EY lifer from New Jersey who, in July, takes the reins at the firm she joined as an intern in 1991.

EY was not so convivial this time last spring. Then, its top brass were tearing themselves apart over the demise of Project Everest, the code name given to the firm’s ambitious plan to split its vast consulting and auditing practices. After months of squabbling — much of it played out in the press — last April, almost a year ago to the day, the giant firm begrudgingly halted the two-year project.

However, the Everest fiasco continues to cause ructions in the firm. Current and former EY partners have told The Sunday Times of large numbers of senior executives jumping ship to rival firms, a breakdown in the relationship between regional partnerships and Di Sibio’s global team, and aggressive staff appraisals leading to widespread job losses. Like its competitors, it also finds itself scrambling to cut costs as it battles with a downturn in demand for consulting work.

To top it all, Stuart Gregory, a rising star in the UK firm, just warned the remaining partners that profits could fall by as much as 15 per cent this year.

Thomson Reuters writes about the National Pipeline Advisory Group (NPAG), one of the AICPA’s multi-faceted initiatives to address the accounting talent crisis.

The accounting talent pipeline discussion in the press and social media has centered around the idea of modernizing the licensure requirements. NPAG’s scope has been broader, however, and the group has identified six major solution theme areas to create a comprehensive plan to minimize the leaks in the talent pipeline. The six themes include:

Telling a better story— All members of the profession can tell a more compelling story on why they chose a career in accounting, how it has benefited them and their clients, and what opportunities exist for others in the profession.
Drawing in more underrepresented minorities— The accounting profession does not mirror the diversity within the US population, and NPAG seeks to increase the number of underrepresented minorities who choose a career in accounting.
Making the educational experience more engaging— A career in accounting offers many opportunities and career paths, in addition to tax and auditing, which could be introduced earlier in students’ education. In addition, accounting programs could be designed to develop and shepherd more students through to graduation rather than weeding out
Reducing the time and cost of education— The additional educational requirements to become a CPA present a barrier for some, and NPAG has been discussing a number of options to help.
Providing better support to CPA exam takers — In order to increase the number of individuals choosing to sit for the CPA exam, employers could provide more support with mentoring, study time, scheduling, financial incentives, and more.
Transforming cultures and business models to inspire a more inclusive, attractive employment experience— There are aspects of the accounting business model that are less appealing to the next generation of talent, such as starting salaries, workload compression, and the lack of work/life integration. Placing a focus on culture, career progression, and purpose in their work are some of the elements being discussed.

They also mention the two NPAG surveys open, one of these days I’ll get around to writing that up (maybe this week even).

Business Insider has some Big 4 pay numbers:

At Deloitte, salaries range from $49,219 a year for entry-level analysts to as much as $875,000 a year for senior principals.

PricewaterhouseCoopers (PwC) pays its entry-level associate roles a minimum of $68,000 a year — and its highest-paid principals earn nearly $1.4 million, according to the US Office of Foreign Labor Certification data.

At KPMG, associates make at least $61,000 a year, while managing directors are paid up to $485,000.

According to the US Office of Foreign Labor Certification data, EY entry-level accountants and auditors earn $54,000 a year and up. Managers earn an average of $320,000 a year, while computer and information systems managers can earn up to $600,000 a year.

Deloitte discusses AI in auditing and necessary upskilling for auditors current and future:

The evolution of skills for auditors is imperative in the era of AI integration. As technology transforms traditional audit practices, auditors must undergo a profound skills evolution, including the need to continuously upskill, to stay relevant. While automation and AI can streamline certain tasks, auditors should recognize the enduring value of specialized skills that cannot be easily replaced. Expertise in areas such as complex valuation processes where contextual understanding is vital, ethical dilemmas, forensic analysis, and industry-specific regulations remains indispensable.

Beyond foundational accounting expertise, auditors now benefit from proficiency in data analytics, understanding AI algorithms, and interpreting results generated by machine learning models. The ability to leverage advanced technologies to extract meaningful insights from complex datasets becomes a pivotal skill. Moreover, auditors need to elevate critical thinking and analytical reasoning to interpret AI-driven outputs and make informed decisions. Effective communication skills remain equally crucial, as auditors must continue to articulate complex findings and insights to stakeholders in a clear and comprehensible manner. In this dynamic landscape, continuous learning and adaptability become integral, forming the foundation of a modern auditor’s skill set. This ensures they navigate the intersection of audit practices and technological advancements with competence and confidence, while remaining professionally skeptical.

Private equity is allegedly sniffing around EY’s consulting practice in Italy:

CVC Capital Partners, one of Europe’s biggest private equity firms, has approached Big Four accountancy group EY about buying its Italian consulting arm, according to people familiar with the matter.

The buyout group sent EY a letter in recent weeks expressing its interest in acquiring the unit, the people said, with one adding that there had been no talks between the two parties.

EY said the approach was a “preliminary expression of interest”, adding: “As part of our global strategy we continue to evaluate our strategic opportunities and will only entertain transactions at the right time and after careful consideration. There are no plans to sell any part of our business at this time.”

KPMG opens a second “innovation” center in India:

Ushering in a new era of collaborative innovation, KPMG in India launched its second KPMG Innovation Kaleidoscope – Insights Centre in Bengaluru today. This collaborative workspace fosters a dynamic environment where our people, clients, start-ups, and strategic alliance partners can engage to co-create solutions to solve dynamic business challenges.

Located within its Bengaluru office in Embassy Golf Links Business Park, the Centre showcases a blend of India and Global solutions to address real-world business requirements. Business leaders will gain access to immersive experiences, valuable insights, innovative technology, and the resources needed to propel their organisations forward. The centre also displays state of art solutions in specific sectors, insight driven solutions demonstrated through AR-VR devices, tax technologies, Digital solutions for ESG, Gen AI solutions across sectors and domains that will address the digital innovation needs of GCCs and clients across sectors.

Earlier:

Forensic accountants will be digging through Rudy Guiliani’s financials:

A federal bankruptcy judge in New York City will allow a group of creditors to perform an extensive forensic accounting of Rudy Giuliani‘s assets, liabilities, conduct and financial position.

In a Friday order by U.S. Bankruptcy Judge Sean Lane, the Official Committee of Unsecured Creditors was given the go-ahead to hire Global Data Risk LLC as a “specialized forensic financial advisor” for the chapter 11 case initiated by Donald Trump’s erstwhile attorney.

The three-person creditors group have long harbored concerns about the financial statements filed by the former New York City mayor with the bankruptcy court — and have never been content to take those claims at face value. In January, Giuliani claimed he only had a “net income” of $2,308 per month after over $40,000 in monthly expenses in schedules and a statement of financial affairs.

Earlier:

These are the candidates for Korean Association of Certified Public Accountants (KAC) chairman. Middle guy looks like he brings the party.

Maeil Business Newspaper (MK) reports in this translated text:

Two months away, the election for the chairman of the Korean Association of Certified Public Accountants (KAC) has heated up. With the Yoon Suk Yeol government showing signs of retreating accounting reform, the accounting industry, which has to prevent it, is bound to pay special attention to the chairman’s election.

There is an atmosphere among accountants that they should vote for candidates who can keep the periodic auditor designation system and the standard audit time system.

I think this is middle guy who is uniquely qualified for the position:

Chairman Lee Jung-hee’s great advantage is that he has experience leading Deloitte Anjin, one of the big four accounting firms. He passed the accountant examination in 1982 and has worked at Anjin Accounting Firm since 1983, and has accumulated experience by working the longest hours in the accounting industry among candidates.

With the big firms restructuring and shuffling people around to address client demand imbalances in certain areas, this recent discrimination case that made it to the Supreme Court may be relevant later. JD Supra:

Supreme Court Says Forced Job Transfers Must Cause Harm, But it Doesn’t Have to be Significant

In Muldrow v. City of St. Louis, the U.S. Supreme Court considered what protections Title VII of the Civil Rights Act of 1964 provides to employees who claim they were the victims of a discriminatory transfer.

On April 17, 2024, the U.S. Supreme Court issued its opinion in Muldrow v. City of St. Louis, finding that an employee challenging a forced job transfer must show that the transfer caused some harm with respect to the terms or conditions of their employment. Importantly, however, the Court noted that this harm need not be significant. In so doing, the Supreme Court rejected the approach previously taken by many federal courts which had required a showing that the harm was significant. In Muldrow, the Supreme Court determined that while an employee must show some harm from a forced transfer, the employee need not satisfy any sort of significance test.

And NPR:

While the 8th Circuit and some other courts have required that such discrimination claims show “significant” or “material” harm, the Supreme Court said that is too high a bar. The anti-discrimination statute “targets practices that ‘treat a person worse’ ” because of their sex, race, religion or national origin, the court said.

Explaining why this higher threshold is necessary, Kagan said that “whether the harm is significant” turns out to be “in the eye of the beholder.” And to prove the point she cited examples that lower courts have held to be not significant:

• an engineering technician is assigned to a new job site — in a 14-by-22- foot wind tunnel;
• a shipping worker is transferred to a position involving only nighttime work;
• and a school principal is transferred to a non-school-based administrative role supervising fewer employees.

In each of those sex or race discrimination cases, the lower courts found that there was no “significant” harm to conditions of employment.

Fortune tackles the issue of long hours:

People of color are more likely to work long, irregular hours that could lead to severe health issues by age 50

The often tongue-in-cheek remark that work may be killing you—long hours, a demanding schedule, and mounds of stress resulting in restless nights—might literally be true, according to new research.

Volatile work schedules, defined as working early mornings and well into the evening, late nights, or anything outside the traditional nine-to-five, can have material consequences for employees’ overall health and well-being, according to Wen-Jui Han, a professor at NYU Silver School of Social Work. That’s all the more true for racial and ethnic minorities.

The health impact disproportionately affects people of color, who are more likely to work jobs with irregular hours, varied shifts, or multiple jobs. But even when Black professionals and other minorities work office jobs, Han says, they often feel the need to work harder and put in longer hours in order to succeed.

KPMG UK partner Stuart Tait talked about generative AI in the tax function, good and bad:

But along with the hype, there’s been plenty of attention on its limitations. Generative AI comes with risks that organisations aren’t yet equipped to deal with. That’s why our survey found that most organisations still have many unanswered questions, and can find it difficult to prioritise AI transformation in the right areas.

ChatGPT has been trained on pretty much the whole of the internet, which means it’s not especially good at answering specialised queries. It’s prone to errors, and to ‘hallucinations’ – making answers up. But given its natural language patterns, its wrong responses sound pretty convincing.

In our own testing, for example, we asked ChatGPT questions about certain areas of the UK tax code. Its responses were confident, and came complete with citations. The only problem being, they were nonsense: we’d asked about provisions in the tax code that don’t actually exist.

Gen AI also comes with data privacy risks. To be effective in an organisational context, generative AI needs to be trained on the organisation’s data – which means sharing that data with the third party providing the solution.

In my view, generative AI is going through the early stages of Gartner’s famous ‘hype cycle’ (see diagram).

Ground-breaking new technologies are often saddled with unrealistic expectations, which then rapidly sink (along with the hype) once its limitations become clear. But the experts who understand the technology continue to develop it, and to discover its practical uses. As a result, it comes into common use over time.

Right now, generative AI is at the ‘inflated expectations’ point in the cycle. It will take a while to become a genuinely valuable tool for businesses. And getting the most from it will require human input. Tax professionals shouldn’t worry about their jobs just yet.

I think that’s it. It is a Monday after all, don’t want to overexert myself. Let me know if you see anything interesting or newsworthy and have a great week!

The post Monday Morning Accounting News Brief: The Least Amount You’ll Make at Big 4; Carmine Gets a Sword Show | 4.22.24 appeared first on Going Concern.

ICYMI: Here are the top stories on Going Concern this week. PwC obviously dominated the headlines and not necessarily for good reasons.

PwC Partners Will Be Getting Dirty Looks at the Country Club for the Foreseeable Future
PwC Announces It’s ‘Aligning Its Organizational Structure’ and Using Fewer BS Words in Job Titles
PwC Is the Best, Prestige-iest Accounting Firm on the Vault Accounting 25
We Forgot to Mention Deloitte Got in Trouble For Cheating This Week, Too
BDO to Undergo Major Office Space Shrinkage in Pittsburgh

Even More PwC

PwC Looks to Shrink New U.S. Consulting Partner Class by More Than 50% [Wall Street Journal]
PricewaterhouseCoopers is looking to shrink its new class of U.S. consulting partners by more than 50% compared with last year as demand for advisory services continues to slow and the firm reorganizes its business lines. The Big Four accounting firm is considering adding about 85 U.S. consulting partners effective July 1, down from 174 a year earlier and more than 200 two years earlier, people familiar with the matter said. The figures include both partners and principals, which are partners who aren’t certified public accountants. That number could change as the figure for the coming fiscal year is finalized, likely in the coming weeks, the people said.

PwC Pushes Back at Evergrande Letter [Wall Street Journal]
One PwC story we didn’t cover this week was the Evergrande letter. We can’t seem to find an English copy of the letter, titled “Who dragged PwC into the fire pit of Evergrande?,” so if anyone has it get in touch.
PricewaterhouseCoopers has responded to a public letter that blamed some of its executives for the global accounting firm’s exposure to China Evergrande, the fallen property giant. PwC issued a statement on Tuesday after a letter circulated on Chinese social media over the weekend, which claimed to be written by some of the firm’s partners. The letter alleged, among other things, that a former partner had raised concerns about Evergrande and suggested dropping it as a client, but a senior executive intervened. PwC said “the letter contains inaccurate statements and false allegations concerning PwC and certain of our partners.” The firm said it has reported the matter “to the relevant authorities” and reserves the right to take further action. Evergrande, once one of China’s biggest property developers, ran up more than $300 billion of liabilities before it defaulted in 2021.

Hong Kong Regulator to Probe PwC Auditing Role Over Evergrande [Bloomberg]
The Accounting and Financial Reporting Council (AFRC) said in a statement Friday the report that has been circulating “expressed significant concerns” regarding potential alleged deficiencies in PwC’s systems of quality management and the quality of its audits of Evergrande. “Given the gravity of these allegations,” the AFRC is “obliged to initiate an investigation,” it said.

Talent Shortage

Viewpoint: How accounting firms can help fix the accounting talent shortage [Boston Business Journal]
Robert Miller, managing partner of Stone & Company, offers ideas to address the accountant shortage. For example:
Change the mindset towards the entry level and intern roles. We need to begin making our entry level staff and interns feel like they are a part of the conversation and stop viewing them as the person who only does scanning, shredding, matching or similar tasks. Gen Z wants to let you know their perspective on things. Ask them what they think. At my firm, we engage our intern in the team lunch conversations, making it clear that we consider him a contributor and part of the official team.

CPAs Have a Branding Problem for the Younger Generation [CPA Journal]
By Jason L. Ackerman, CPA, CFP, CGMA
Probably the hottest topic in the profession over the past few years has been the pipeline problem: Firms can’t find qualified individuals to handle the increasingly complex world that CPAs deal with on an ongoing basis. The problem has become so serious that the AICPA summoned a task force that came up with 12 root causes of the current pipeline crisis (“AICPA Publishes Detailed Plan to Boost Pool of Prospective CPA Candidates“). I think to understand the root cause of our pipeline issue, we have to first wrestle with the fundamental question—do we still need CPAs? And if the answer is yes, how can we market and convey the appeal of being a CPA to a new generation and create a designation that people, both young and old, will continue to strive to achieve its credentialing?

While you’re here, check out Accountingfly’s top remote accounting candidates of the week. Accountant shortage? Never heard of her. Sign up for Always-On Recruiting to get great candidates like these sent to your inbox every week with no cost and no obligation to hire.

Audit

Audit Board Urged to Rein In Plan to Curb Misleading Marketing [Bloomberg Tax]
CPAs pressed the US audit board to scale back a proposal meant to prevent firms from falsely marketing their registration with the regulator as an endorsement of their work. The bar for possible enforcement actions is set too low under draft rules the Public Company Accounting Oversight Board released in February, exposing firms to greater legal liability, auditors and accounting groups told the regulator in feedback submitted through April 15. The rules should instead focus on clear cases where a firm promotes registration with PCAOB as a seal of approval, some comment letters said. “The rule should not apply to unintentional conduct when a registered accounting firm or an associated person is making a statement of fact,” PwC LLP, also known as PricewaterhouseCoopers, said in a letter to the audit board. The letter was one of 18 submissions on the marketing proposal.

See: Docket 054: Proposals Regarding False or Misleading Statements Concerning PCAOB Registration and Oversight and Constructive Requests to Withdraw from Registration

Earlier:

Tether CEO Says An Audit By A Big Four Giant Is Our Top Priority [CoinGape]
Tether is currently working with BDO.
According to Tether CEO Paolo Ardoino, the major accounting firms, including Deloitte, PwC, EY, and KPMG, are hesitant to engage with Tether due to concerns about potential reputational damage. Ardoino stated, “None of the Big Four firms are willing to audit us.” However, he emphasized that securing one of them as Tether’s auditor is a high priority for the company. Currently, with a market cap of over $109.5 billion, Tether’s USDT is the third-largest cryptocurrency currently in the market. Thus, an audit of all the USDT reserves would bring more confidence among investors about the stablecoin issuer. This is especially true when recent reports suggest that Tether is the most-used stablecoin for criminal activity.

Technology

75% of Mid-Market Companies to Invest in AI Over Next Five Years, According to Wipfli Survey [PR Newswire]
Wipfli announced the release of a survey conducted of 256 c-suite, founders, and board of directors at mid-market companies. The survey sheds light on the evolving landscape of technology investments and workforce dynamics among these businesses, providing valuable insights into their strategies and challenges. The survey revealed that over the past five years, these savvy enterprises have been investing in the digital infrastructure of tomorrow. Among these investments, cloud computing emerged as a top priority, with 83% of respondents reporting investments in this area. Additionally, 66% have embraced the transformative potential of AI, while 81% have realized the necessity of increased cybersecurity measures. Furthermore, 72% have invested in data analytics and business intelligence, recognizing the value of actionable insights derived from data.

Don’t Believe The Negative ‘Hype’—New Jobs Will Be Created With AI, EY Vice Chair Says [Forbes]
Raj Sharma, EY Americas vice chair of consulting, who oversees more than 25,000 consulting professionals across the Americas, is highly optimistic about the potential for AI. As a self-described technologist, Sharma is advising corporate clients to adapt and embrace the fast-growing technology, despite the higher costs of capital to higher rates, and a trend toward cost cutting among many companies, particularly in the tech space. In a Zoom video interview with the vice chair, he estimates that 50% to 60% of the world’s jobs will be impacted in the next five or six years. However, Sharma said it will not create mass unemployment “as some people are hyping.” Instead he stated, “It will just create different types of employment altogether.” Humans are still going to be at the center of any business.

‘Big Four’ accounting firm EY to use Polygon PoS for business contracts [Blockworks]
Ernst & Young revealed an enterprise contract management service that would let clients put contracts on a public blockchain while keeping business information private through zero-knowledge circuits. The firm markets its OpsChain Contract Manager as running on Ethereum, although it currently runs on Polygon proof-of-stake (PoS). In a press release, EY said the service would bring business agreements to Ethereum, but this isn’t exactly the case. Nightfall, the zero-knowledge rollup EY developed to do things like manage business contracts, actually runs on Polygon PoS, an independent blockchain.

Animals? In Footnotes?

Missing Dog Found with His Face ‘Wrapped in Duct Tape’ Recovers as Shelter Searches for Answers [People]
The Nebraska Humane Society is asking for help finding out who covered a missing dog’s face in duct tape and then left the pet in a dumpster. According to an April 15 Facebook post from the shelter, employees at an Omaha accounting firm found the canine in a dumpster behind the office’s building. An employee at the firm heard sounds coming from the dumpster on April 14, but they weren’t comfortable investigating the commotion, per the shelter’s post. The next day, the firm’s staff opened the dumpster expecting to find a raccoon but found a small dog whose “entire head was wrapped in duct tape” instead.

Bunnies hop their way into the hearts of a Medicine Hat accounting firm [CHAT News (Canada)]
Hippity-hop the stress away. Every year after a stressful tax season, Medicine Hat accounting firm MNP Accounting does a “stress buster” event. Normally, it would include a nice dinner and maybe some drinks to blow off steam. This year, they took a different approach. With the help of Bunny Run Rabbit Rescue, the firm brought bunnies into the office for staff to enjoy and to even consider adoption. MNP partner Delayne Sackman said the new approach was well received. “I think the mood has definitely been uplifted,” Sackman said. “Everybody came in with a case of the Mondays and they’re all leaving happy and smiling and hopefully, maybe adopting some of these bunnies.”

Government

Deloitte Secures Potential $100M Navy OTA for Digital Manufacturing Data Vault [GovCon Wire]
Deloitte Consulting will provide advanced manufacturing support and enterprisewide digital manufacturing data vault capabilities and services under a potential seven-year, $99.8 million other transaction production agreement with the U.S. Navy. The majority of the contract work will occur in Arlington, Virginia, through April 2031, the Department of Defense said Thursday.

Deloitte backs off SHARKCAGE protest [Washington Technology]
Deloitte Consulting has backed away from its protest of a potential $789 million Navy contract won by Accenture’s U.S. federal subsidiary. The SHARKCAGE contract is part of a Navy effort to build a new IT environment for sensing, detecting and analyzing activity across its networks. Accenture Federal Services won the contract in February and Deloitte followed with a protest against how the Navy evaluated proposals. More specifically, Deloitte didn’t like how its proposal for a prospective task order was evaluated. Deloitte also criticized how the Navy evaluated its technical and management approaches, and the firm’s plan for supply chain risk management.

EY’s Wirecard audits marred by ‘repeated grave’ violations of duties, says watchdog [Financial Times]
EY made “grave” and “repeated” violations of professional duties in its audits of defunct payments firm Wirecard, Germany’s audit watchdog Apas concluded on Friday. Apas criticised the Big Four firm’s “deficient execution” of its Wirecard audits as well as its “insufficient audit reporting” that resulted in the issuing of “objectively inaccurate audit opinions”. The watchdog also rebuked EY over the “grave failure” of its internal quality controls, adding that “several key executives” of the firm conducted “multiple violations of professional duties” during the quality control process.

People

Michael Plowgian rejoins KPMG as tax principal [Consulting.us]
He rejoins KPMG’s national tax practice in Washington from the US treasury department, where he spent two years and was deputy assistant secretary for international tax affairs. Plowgian also served as top US negotiator at the OECD, where he worked on advancing the two-pillar tax reform plan – which reallocates taxing rights for the largest multinationals and institutes a global minimum tax.

RubinBrown’s new KC office leader points to one factor driving her promotion [Kansas City Business Journal]
Megan Knoblauch has worked at RubinBrown LLP since she was fresh out of college, but she’s a much different person now as she becomes the Kansas City office’s managing partner on June 1. “I started as a staff person who was single, and now I’m married and have three kids,” Knoblauch said. “It’s just a completely different life than where I was when I started at RubinBrown. They’ve just been so supportive, enabling me to have the career I’ve always wanted.”

Paul Knopp: Scaling The Ranks And Defending Audit Quality [Forbes]
Defying the odds defines Paul Knopp—and has molded him into the CPA he is today. Starting out in the late seventies as a first-generation college student from Austin, he earned a bachelor’s in business and then an MBA from the University of Texas. Knopp considered the CPA profession a “surefire way for a person with zero money to come out the other side of college and have a successful career.” In 1983, he joined KPMG US as an audit associate in San Antonio; four decades later, he has scaled the ranks at the only company he’s ever known to become CEO of one of the nation’s four largest accounting firms.

Tax

Tax audits cast a lingering chill over targeted firms, study suggests [Bayes Business School]
Tax audits improve companies’ compliance but hit their investment plans and trigger volatility in their share price, new research from a Bayes academic suggests. The study concludes that the uncertainty associated with intense and prolonged scrutiny by the tax authorities probably increases companies’ tax payments for up to three years – but that the economic downside also lingers after the auditors have moved on. Researchers at Bayes Business School (formerly Cass), City, University of London and Booth School of Business, University of Chicago, used generative AI tools to assess the impact of Internal Revenue Service (IRS) audits on 3,284 American companies.

IRS commissioner indicates AI will play growing role in future tax collection [Government Executive]
IRS commissioner Danny Werfel, in remarks made April 17 at UiPath on Tour: Public Sector Event in Washington, D.C., outlined two kinds AI uses the IRS is exploring: virtual chatbots that assist and benefit tax-paying citizens and AI tools IRS agents can use to identify potential tax cheats. “Right now, I believe that there are AI solutions that we have not yet leveraged that exist today that can help with some of these basic questions to the benefit of taxpayers,” Werfel said. “And on the other side of the equation, we are using AI today to do even more to unlock and spot this complexity.” Werfel likened advanced AI tools to “night vision goggles” the IRS needs to “unlock and see and spot the issues” in potential cases involving the “most complicated, largest taxpayers” in the country.

The President’s Fiscal Year 2025 IRS Budget and the IRS 2024 Filing Season [Senate Finance Committee]

News

Virginia Beach accountant pleads guilty to stealing from client, using pandemic funds on house down payment [The Virginian-Pilot]
A Virginia Beach accountant pleaded guilty April 12 to stealing more than $1 million from a client and using an additional $250,000 in COVID-19 small business relief money for personal bills. Maria Reich, 45, former president of On Call Accountants, pleaded guilty in U.S. District Court in Norfolk to eight counts of wire fraud as part of a plea agreement with prosecutors. The crime carries a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss, full restitution, forfeiture of fraud-related assets and a special assessment. She used one of her client’s money for a host of personal bills and the pandemic relief money for a down payment on a house, according to a statement of facts submitted in the case.

GAO Seeks New Members for Tribal and Indigenous Advisory Council [US Government Accountability Office]
The U.S. Government Accountability Office (GAO) is seeking nominations for five positions on its Tribal and Indigenous Advisory Council. The Council was formed in 2022 to provide insights and recommendations and help guide GAO’s future work on critical issues affecting Tribal Nations and their citizens. “Since its inception, the Tribal and Indigenous Advisory Council has provided valuable input and insight into the persistent challenges facing tribal communities,” said Gene L. Dodaro, Comptroller General of the United States and head of the GAO. “We look forward to welcoming new members of the Council to ensure GAO’s work includes a diverse range of tribal and indigenous perspectives.”

The post Friday Footnotes: PwC Slashes Partner Class; Accounting Firm Rescues Dog; Do We Still Need CPAs? | 4.19.24 appeared first on Going Concern.

Jack Castonguay (who we miss terribly on Twitter) wrote a little something for Bloomberg Tax about the PCAOB’s latest proposal that would make traditionally secretive audit firms’ business much more public:

The business model for public accounting firms is changing rapidly as they search for outside investors and private equity firms rush to the front of the line.

Regulations need to change to match. In response, the Public Company Accounting Oversight Board has drafted a rule that the accounting firms can have public trust or private financials—but they can’t have both.

Public accounting firms operate in a unique space in our society. They’re private entities specifically designed to serve the public interest. The audit opinions they issue typically have meaning and value because the firms operate with public trust. Without public trust, the opinions aren’t worth the paper they are written on or the PDFs they are contained in.

One of the best ways to maintain that trust is through transparency. In the public company audit arena, this transparency is maintained through PCAOB inspections of auditors. The PCAOB inspects the work of the inspectors (auditors) who are inspecting the books of listed companies.

But what about the books of the auditor? How do regulators and the public know that accounting firms are operating with the best interests of the public at the forefront of their work, as they are expected to do? Right now, they don’t.

Yet this shows why the new draft disclosure rule from PCAOB would require listed public accounting firms to disclose “cyber breaches, material threats to their business, changes in firm ownership, and significant financing” is needed.

This might be a timely rule given the recent explosion of private equity interest and investment in firms. Or it could just be the PCAOB trying to make itself look useful again.

On a somewhat related note, Australia’s Accountants Daily reports the International Ethics Standards Board for Accountants (IESBA) announced it will “probe firm culture amid accounting ‘trust crisis’.” Way to blow it for everyone, PwC Australia.

Accounting is facing a “global trust crisis” in the wake of high-profile failures, the global ethics standard-setter says, vowing to review firm culture and tightening “limited” rules in a new strategy document.

The International Ethics Standards Board for Accountants (IESBA) said in its three-year Strategy and Work Plan 2024-27 released last week that it was a matter of public interest to prioritise ethics.

Without explicitly referring to PwC’s actions in Australia, it said “Public trust in the accountancy profession continues being buffeted by recurring high-profile corporate failures and ethical lapses in firms.”

“A number of these events have resulted in government inquiries, significant regulatory penalties and other significant adverse consequences,” the document read, raising questions about “whether firms have the right culture, governance and tone at the top to drive ethical behaviour consistently across all their professional activities.”

The IESBA’s code forms the basis of accounting ethics rules in over 130 jurisdictions, including Australia. As a result, IESBA chair Gabriela Figueiredo Dias said the body would be “proactively positioning [itself] as a part of the solution for the global trust crisis.”

Here’s the announcement from IESBA: IESBA UNVEILS 4-YEAR STRATEGIC ROADMAP PUTTING ETHICS AT THE HEART OF CORPORATE DECISION-MAKING (WHY ARE YOU YELLING):

“Putting ethics at the center of every business judgment and decision is the surest way to earn, restore and strengthen public trust in all that an organization does. The external landscape continues to evolve, presenting new dynamics and challenges, but good ethical behavior acts as a constant amidst the uncertainty. It is about integrity, expected behaviors and mindset, and making the right decision,” said Gabriela Figueiredo Dias, IESBA Chair. “Our new strategic plan reflects the IESBA’s unwavering determination to face the external environment head-on, broaden the reach and scope of our work, and set the highest standards of ethical conduct for professional accountants and others who play a role, large or small, in the financial and non-financial information supply chain. That is how our work, vision and ambition support the proper functioning and sustainability of organizations, financial markets and economies worldwide in the public interest.”

The Philadelphia Inquirer — which is a real newspaper, I’ve written an op-ed for them myself — addresses “how young accountants are reshaping their firms.” Molly Kowal, who graduated in 2021 and works for EisnerAmper, is just one person they spoke to for the piece, along with her sister Grace who works remotely for Aprio:

Accounting firms are prioritizing work-life balance as they face a ‘human capital issue’ — even during tax season

Molly Kowal said some firms are also advertising [billable hours limits] externally, often using a “55-hour rule” during busy season as a way to draw in candidates. Grace Kowal said this seems to be a decrease from years ago, when people might bill 60 to 70 hours a week, or more.

“I have managers that are making sure we’re not working crazy hours,” Molly Kowal said. “As a way to maintain people staying, they’re aware of trying to keep a more realistic goal.”

“We’re getting the work done, but not burning people out,” Grace Kowal said. “Nobody wants to go to a firm that’s going to run you into the ground.”

And Jen Cryder, CEO of the Pennsylvania Institute of Certified Public Accountants (PICPA):

For years, Cryder said, big accounting firms have been investing in tools that eliminate some of the workload during busy season, and that’s starting to trickle down to midsize accounting firms in Philadelphia. She recalls her early years as an intern and junior accountant two decades ago, noting that “all of that has been replaced by technology for most firms these days.”

They are also increasingly bringing on non-accountants to handle administrative work and other non-accounting tasks, Endres said. She’s noticed more hiring for those support roles in recent years.

They also quoted an ex-Deloitter who was billing 100 hours a week at her peak who said, “I left because at some point I didn’t feel like myself.”

FASB might be regretting asking for input on a new chapter of its Conceptual Framework last December. If finalized by the Board, the proposed chapter would become Chapter 6 of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and would represent the completion of the FASB’s Conceptual Framework.

The proposed chapter provides concepts for the Board to consider when choosing a measurement system for an asset or a liability recognized in general purpose financial statements. It describes:

• Two relevant and representationally faithful measurement systems: the entry price system and the exit price system and
• Considerations when selecting a measurement system.

Bloomberg Tax says the proposal has drawn “blunt feedback” which is a polite way of saying people think it’s stupid.

How businesses should measure assets and liabilities is one of the trickiest issues in accounting. Feedback on a plan to streamline US rulemakers’ approach to setting measurement requirements reflects just how thorny that debate can get.

Academics, audit firms, and professional groups gave blunt feedback on a Financial Accounting Standards Board proposal laying out high-level concepts for how assets and liabilities should be measured, comment letters show. The proposal is confusing, some responses said, and others said it didn’t go far enough to help the board craft consistent accounting rules.

The proposal, issued in December as a draft chapter in FASB’s Conceptual Framework, calls for updating an internal guide the board uses when making tough decisions about writing accounting rules for US companies and not-for-profit organizations. FASB has been working on and off on its Conceptual Framework since the board was founded in 1973 but has never developed robust concepts on measurement.

The current proposal doesn’t offer ground-breaking guidance and maintains the status quo, wrote Paul Miller, emeritus accounting professor at the University of Colorado at Colorado Springs and author of a book about FASB’s history.

“Beyond any doubt, I believe the board could have done better,” Miller wrote. “If this draft represents the best it can do, I’m full of doubts about its present credibility and its future existence.”

You can access the deets from FASB here after you read and accept their terms.

Dean of the University of Texas at Austin’s McCombs School of Business Lillian Mills talks about another FASB rule that sheds light on corporate assistance from the gubmint for Bloomberg Law:

The federal government announced last month that it will grant up to $8.5 billion to Intel Corp., one of the first of the $39 billion in grants it will make under the CHIPS and Science Act.

But the CHIPS and Science Act is just the tip of the fiscal iceberg. In 2023, state and federal governments made direct grants to more than 2,200 businesses, according to a database compiled from government records by the watchdog group Good Jobs First.

Although taxpayers are the ones ultimately paying for these grants, they often have a hard time finding out what they’re paying for. But transparency for taxpayers and other stakeholders is coming, thanks to the Financial Accounting Standards Board, which is developing a new rule on disclosing government assistance in financial reports.

The new rule would be welcome news. In published research, I and co-author Ryan Hess of Oklahoma State University looked at the 50 largest assistance packages between 2003 and 2019, as tallied by Good Jobs First. We found 28 of the companies didn’t mention government assistance at all in their financial statements, and only five disclosed any details about assistance received and commitments made in exchange.

Here’s that paper, “Government Assistance: A Growing, Underdisclosed Financing Source” in Accounting Horizons 1–25, for your reading pleasure.

Canadian Accountant said the historically massive fine against KPMG Netherlands for answer sharing puts PwC Canada’s cheating into perspective. What they mean is, in true Canadian fashion PwC copped to the offense and cooperated with investigators whereas KPMG cheaters did not. Quite the opposite actually.

As Big Four foreign firms punished for exam cheating, PwC Canada fines put into perspective:

The difference in the magnitude between the recent fines and those of PwC Canada was largely due to the “extraordinary cooperation” of the Canadian firm in reporting the failings to audit regulators. A tersely worded statement, titled “The PCAOB will not tolerate cheating,” from PCAOB Chair Erica Y. Williams cited that the Dutch firm had misinformed investigators.

This article from The Times (UK) is a month old but I’m only just now seeing it because the AI content farms have been spitting out articles on it in the last few days and it’s showing up in my news feeds. So now you’re seeing it too:

Deloitte apprentice who joined at 18 becomes £1 million a year partner, and he never went to university

Ben Newton was bursting with pride when he took his seat at the table for a meeting of the top brass at Deloitte last week. The 30-year-old, who joined the professional services firm 12 years ago, has just been made a partner — whose pay, on average, is £1 million. For anyone to join those ranks so young is a big achievement, but for Newton it is even bigger — he was the first to have made partner on its Brightstart apprentice scheme for school leavers.

Deloitte started its Brightstart scheme to widen its hiring pool and offer people a route into work rather than through university.

Newton said: “I grew up in Dorset. My dad left school at 16 and was a soldier in the army. My mum worked in a pub and then a travel agent. It was an upbringing far removed from London and the world of finance.”

He had been the first in his family to be offered a place at university — to study maths at Warwick — but decided to join Brightstart so he could earn a salary and get an early start in the workplace. Newton is now a qualified accountant, and working as an auditor.

Not a bad gig for a non-college grad if you can get it.

Partially Chinese state-owned IOL (Independent Online) of South Africa published a big old thing about the Big 4 oligopoly:

Run on numbers: The role of the big four auditing companies in a financialised world

Accounting firms have always been central to the accumulation strategies of the powerful. In the modern financialised economy, they have become even more important. (Financialisation refers to the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of the domestic and international economies).

As accounting firms increasingly took on additional functions, particularly as consultancies, they have moved further and further away from the mandate of deterring malfeasance. After a period of state-led economic policy following World War II, characterised by high tax rates, government spending, and regulation, the 1980s saw a resurgence of free-market ideologues led by former prime minister of the United Kingdom Margaret Thatcher and former United States of America president Ronald Reagan.

Their policies at home rapidly slashed corporate taxes and regulations. These ideas were also proliferated throughout the global south by the policies of the International Monetary Fund (IMF) and the World Bank, opening markets for Western corporations to profiteer, often at the expense of public services.

These radical free-market ideas, coupled with modern technology and the ease of moving money, prompted the rapid financialisation of the global economy. In a financialised world, accountants are indispensable. They provide consulting services, including tax advice, financial risk management, and financial management advice, amongst other things. They function as both monitors and spurs of the financialised global economy.

Modern War Institute at West Point published “A Tax Day Resolution For the Department of Defense: Pass an Audit“

There are several reasons why the American taxpayer should be concerned about DoD having never passed an audit. Most obviously, defense spending is by far the largest consumer of US federal discretionary tax revenue, with total budget authorizations approaching $1 trillion annually. There is a multitude of contexts available to establish just how big this number is—almost 40 percent of all reported global military expenditures, more than the GDP of all but nineteen countries, or a stack of $100 bills that would be six hundred miles high, to list a few. Regardless of one’s choice of context, the pathways to potential fraud, waste, abuse, and corruption within the US defense budget are commensurably numerous. Additionally, the Department of Defense is the largest employer in the world (and thus the largest portion of the federal bureaucracy), which makes the pathways available to a large number of stakeholders. These two factors of scale—a lot of money and a lot of people—suggest a level of complexity in DoD operations where even expected waste—the literal costs of doing business—could total billions of dollars.

Related:

CNBC coming in with another timely Tax Day piece:

State tax officials are using AI to go after wealthy payers

“States are getting very sophisticated using AI to determine the best audit candidates,” said Mark Klein, partner and chairman emeritus at Hodgson Russ LLP. “And guess what? When you’re looking for revenue, it’s not going to be the person making $10,000 a year. It’s going to be the person making $10 million.”

Klein said the state is sending out hundreds of thousands of AI-generated letters looking for revenue.

“It’s like a fishing expedition,” he said.

Lastly, here was the scene at an IRS office in Atlanta over the weekend:

‘I want my money’: People spend hours in line outside Atlanta tax center for IRS help

Long lines wrapped around Atlanta’s Tax Assistance Center Saturday morning.

The IRS held extended hours ahead of Monday’s tax deadline. People were able to speak one-on-one with an IRS representative at the event.

People were camped out in lawn chairs as early as 6 a.m. ahead of the 9 a.m. event — and many told Atlanta News First that they didn’t come by choice.

“All I need to do is verify my identity, and that’s it. It’s a tiny process,” one attendee said.

A majority of the people in line had received an email or letter from the IRS stating they had to verify their identity in person. The notification went on to say their refund was being held until they did so.

I've never seen or heard of this before. What is the #IRS trying to accomplish with this and why would they tell more people to come in person than they can reasonably handle?!
Someone needs to go wake up Danny and have him fix this. #TaxTwitter https://t.co/RDh80XbpSR https://t.co/oRUkjqnAdY

— Brian Streig, CPA (@cbriancpa) April 14, 2024

That was more news than I ever could have hoped to find on a Monday morning in April. I hope those of you on the grind will get some rest soon. To you and everyone else, let’s make it a good one OK? Shout if you see or hear anything good via text 202-505-8885, email, or Twitter. Love ya, mean it.

The post Monday Morning Accounting News Brief: Capping Busy Season Hours FTW; Open the Books on Audit Firms? | 4.15.24 appeared first on Going Concern.

ICYMI: These are the most-read articles on Going Concern this week:

Tax Preparer Finds Out in the Worst Way Possible That ERC Wasn’t a Free Money Glitch
Survey Says: Which Group of Auditors Are Most Satisfied With Their Salaries?
For the Eighth Year in a Row, EY Is the Busiest Public Company Auditor
Mid-Tier Firms Are Kicking Big 4’s Ass on Fortune’s 2024 Best Companies to Work For List
The PCAOB Just Handed Out Its Biggest Fine to Date to Some KPMG Cheaters

Honorable mention: You Might Not Be Using Microsoft Teams Much Longer

Threats Ethics

Chair Williams Press Conference Remarks: The PCAOB Will Not Tolerate Cheating [PCAOB]
PCAOB Chair Erica Y. Williams made the following statement today at a virtual press conference:

Since 2021, the PCAOB has sanctioned nine registered firms for exam cheating.

I want to be very clear: The PCAOB will not tolerate exam cheating nor any other unethical behavior, period.

Impaired ethics erode trust and threaten the investor confidence our system relies on. The PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity.

This Board set a goal to strengthen PCAOB enforcement, and we are doing just that. As of today, the PCAOB has imposed $34 million in penalties this year alone, and it’s only April.

We set a record in 2022. We broke that record in 2023. And we are breaking it again today.

Let today’s news be a clear warning to those who break the rules – if you put investors at risk, there will be consequences.

Talent

‘Breakdown in services’ looms because of vacancies in Montreal’s finance department: report [Montreal Gazette]
With numerous job vacancies and several retirements on the horizon, the city of Montreal’s finance department is facing “an imminent risk of a lack of expertise for ongoing business management and a breakdown in services,” according to a report tabled at the last city council meeting. The city’s audit committee, a monitoring body that tracks the findings and recommendations of Montreal’s auditor general, comptroller general and external auditors, makes the observation in its latest annual report. “This situation worsened in 2023,” says the report, which was tabled in council in March. It notes that numerous finance department employees are planning to retire in the next two years and that the department’s employee retention rate “is very low.” While it doesn’t provide reasons for the department’s low retention rate and difficulty with recruitment, the report says understaffing has an impact on performance.

Accounting jobs are in high demand—many pay over $100,000 and can be done from home [CNBC]
Didn’t they write this same article a few months ago?
While the average mean salary for accountants in the U.S. is about $68,000, according to ZipRecruiter data, more experienced accountants stand to earn anywhere from $150,000 to upwards of $200,000 a year. Increased demand for accountants means that even entry-level candidates can command higher salaries, says Brandi Britton, a finance and accounting expert at Robert Half, who notes that at some firms, even those new to accounting can expect to earn at least $85,000.

PCAOB Proposes Turnover Metrics and Other New Disclosures for Audit Firms [Wall Street Journal]
The Public Company Accounting Oversight Board wants audit firms to disclose metrics on the involvement and turnover of their auditors and provide new details on fees and cybersecurity vulnerabilities, in a pair of proposals aimed at standardizing the information provided to investors. Audit firms currently must publicly identify the lead partner on the audits they perform and the other firms that helped with that work. Firms also annually share information such as a list of their public-company audit clients and the addresses of their offices. Some firms voluntarily disclose firm-level data such as average staff turnover and employee-survey results on culture, but the metrics aren’t consistent and widespread across firms. The board on Tuesday voted unanimously, 5-0, to require hundreds of firms to publicly disclose a set of 11 metrics, ranging from auditor turnover to partner involvement, workload and work experience. Firms would have to provide these metrics for both their individual audit efforts and overall audit practices, but there are exceptions.

This is your weekly reminder that Accountingfly has loads of accounting talent ready to get to work for you. Check out this week’s top remote accountants to browse the goods and sign up for Always-On Recruiting to gain full, free access to a pool of highly skilled and experienced remote accountants ready to join your team at no up-front cost.

News

Accounting firm and second company ordered to pay $26m over confidential information [ABC News Australia]
A regional Victorian accounting firm, its director and a second company he is involved in have been ordered to pay more than $26 million to two former clients after using confidential information to take advantage of a business opportunity. A Supreme Court justice found Ballarat-based firm Mulcahy and Co director James Mulcahy formed a company with others to buy a stake in Chris’s Body Builders after discussions with two clients about their intentions to purchase the Melbourne truck manufacturing business.

Tesla Korea makes accounting errors [The Chosun Daily]
Tesla Korea, the South Korean unit of U.S. electric carmaker Tesla, has failed to properly reflect fines in its financial statements and was issued a “qualified opinion” from an accounting firm on April 10. Tesla Korea was subjected to 25.1 billion won in corporate taxes, but its management team recorded the amount as a receivable in its financial statements. Tesla Korea disclosed on the same day that it had received a “qualified opinion” on the previous year’s financial statements from Taesung Accounting Corp., the auditor of Tesla Korea, about the company’s financial statements for last year.

Generative AI

Adobe’s ‘Ethical’ Firefly AI Was Trained on Midjourney Images [Bloomberg]
When Adobe Inc. released its Firefly image-generating software last year, the company said the artificial intelligence model was trained mainly on Adobe Stock, its database of hundreds of millions of licensed images. Firefly, Adobe said, was a “commercially safe” alternative to competitors like Midjourney, which learned by scraping pictures from across the internet. But behind the scenes, Adobe also was relying in part on AI-generated content to train Firefly, including from those same AI rivals. In numerous presentations and public posts about how Firefly is safer than the competition due to its training data, Adobe never made clear that its model actually used images from some of these same competitors.

GenAI risks and challenges for the economy [EY Parthenon]
The economic gains from GenAI could favor company profits at the expense of labor. As organizations adopt and absorb GenAI technologies, they may substitute capital for labor, which could lead to lower labor demand and reduce workers’ bargaining power. Moreover, rising market concentration as the GenAI industry becomes dominated by a few large businesses may lead to higher markups and result in a growing fraction of productivity gains accruing to a few corporations.

What changes minds on GenAI? Adopting it [PwC]
When it comes to the impact of generative AI on business, adopting is believing, according to PwC’s 27th Annual Global CEO Survey. Respondents whose companies have already started widely using the technology reported considerably more confidence than other CEOs in GenAI’s potential to improve the quality of products and services, build trust with stakeholders and change how the company creates value—even as it spurs major changes in the workforce and the competitive landscape.

Tax

The Employee Retention Credit: New IRS Initiatives Raise Legal Considerations for Employers [CPA Journal]
Employers and their advisors should carefully consider recent IRS initiatives concerning the Employee Retention Credit (ERC). Although the initiatives are primarily procedural, an employer’s decision about whether to proceed with or withdraw an ERC claim requires both legal and factual analysis.

Lenexa accountant’s office goes dark, leaving clients concerned with looming deadline [KCTV5]
This guy’s CPA license was revoked by the Kansas Board of Accountancy last year.
With less than a week left before the federal tax filing deadline, Doug Blattman is in panic mode. His longtime CPA suddenly stopped answering his calls. Now, he can’t get access to the documents he dropped off, and he’s not the only one. Blattman contacted KCTV5 to send a message to other clients who might be waiting. Blattman said he last reached Charles Allen at his Lenexa office on Friday. He said Allen told him he needed more time. Blattman returned Monday. The office was dark. The door was locked. Other clients were there as well with similar accounts, he said. Blattman said his main concern now is getting the paperwork he dropped off at the start so that he can try to get it to another tax preparer, though he doubts he can find someone to get to it in time. “Since his revocation, we have received numerous complaints from clients who are unable to contact him; are unable to get their records returned; and or have learned that their tax returns have not been filed for which he was engaged to complete,” Kansas Board of Accountancy executive director Susan Somers wrote. “Given that Charles Allen no longer has a certificate and permit, these complaints do not fall within the jurisdiction of the Board.”

How PwC teams work on a transformation project [PwC Netherlands]
Oh boy is this corny.
At PwC, colleagues continuously work on customer solutions and strive, preferably in a team, for the best and most future-proof result. Read the story of Charlotte, Leonardo, and Rajeev. All three of them worked together from different disciplines on a transformation project for Heineken.

Practice

AICPA and State CPA Societies Have ‘Grave Concerns’ with BOI Reporting [AICPA & CIMA]
In a recent letter to the Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN), the American Institute of CPAs (AICPA), together with 54 state CPA societies, expressed serious concerns with the rollout and push to implement FinCEN’s Beneficial Ownership Information reporting requirement without regard for the impact to the small business community. The AICPA has submitted past letters to FinCEN and the U.S. Congress noting concerns about the constricted timeline for the small business community to understand the reporting requirement and urging caution regarding the failure to provide a reasonable timeframe for small businesses to comply with BOI for both new and existing entities. Additionally, the AICPA has raised concerns over the estimated burden hours and associated time-cost which has effectively become a 30-day tracking requirement.

EY analyst warns of growing industry pushback against ESG scoring [Mining.com]
The mining industry is re-evaluating ESG benchmarking due to its perceived burdensome nature and perceived misalignment with core business objectives, EY Canada’s mining and metals sector leader, Theo Yameogo, says. “There’s increased pushback against ESG (environmental, social and governance) benchmarking, for various reasons,” Yameogo told The Northern Miner’s western editor, Henry Lazenby, during last month’s Prospectors and Developers Association of Canada’s annual convention in Toronto. “Some I’ve heard say it is too costly, too complex, and really detracts from the core business of doing business.”

Big 4

EY Weighs Another 100 Job Cuts in Oceania, The Australian Reports [Bloomberg]
EY is mulling plans to trim another 100 jobs in its Oceania business, the latest sign of pressure in an industry that spans accounting, audit and consulting, according to The Australian. “In the event EY Oceania makes any workforce changes, our first and foremost priority will be to communicate with impacted people in our business, before updating stakeholders more broadly,” the firm said in an emailed statement. “We have not communicated any workforce changes with our people and will update the media if this occurs.”

Aaaand…

EY to cut 100-plus staff amid advisory downturn [Australian Financial Review]
Big four consulting firm EY is planning to cut more than 100 roles next week, or more than 1 per cent of its 10,000-strong workforce, due to the persistent downturn in the advisory market. The cuts follow the firm culling dozens of partners and more than 240 staff in the second half of 2023. The Australian Financial Review understands that the losses will mainly come from the consulting and financial advisory divisions with final numbers still being determined.

Top Cloud Executives to Watch in 2024: Deloitte Consulting’s Paul Baliff [WashingtonExec]
As Deloitte’s federal health sector cloud lead, “Paul advocates for his clients and collaborates with Cloud hyperscalers and Alliance Partners to develop innovative solutions that propel our clients’ missions securely and with the highest quality outcomes for their constituents,” said Nishita Henry, principal at Deloitte Consulting and global chief commercial officer of Amazon relationship.

The post Friday Footnotes: Ex-CPA Leaves Clients in the Lurch Before Tax Day; EY Layoffs; More ERC Concerns | 4.12.24 appeared first on Going Concern.

About that total eclipse today. USA TODAY has a zip code checker that will tell you when to expect it in your area. It begins in Mexico at just after 11 am Pacific and ends in Maine at 3:35 pm Eastern. Remember to protect your eyes, we know you don’t get much sun to begin with.

ICYMI: Should after-hours emails be illegal? They will be if one California lawmaker gets his way.

Business Insider analyzed the US Office of Foreign Labor Certification’s 2023 disclosure data for permanent and temporary foreign workers to find out what Big 4 firms pay.

The so called “Big Four” accounting firms — Deloitte, PricewaterhouseCoopers (PwC), KPMG, and Ernst & Young (EY) — are known for paying their staff high salaries.

Are they really tho?

An entry-level consultant who just graduated from business school can make over $200,000 a year at the four firms when you include base salary, bonuses, and relocation expenses.

Several of these firms have faced layoffs and implemented hiring freezes over the past year as demand for consulting services has waned. Still, they’re a good bet for anyone looking to land a six-figure job straight out of school.

The roles are a bit all over the place, like they have manager salaries for these three firms:

• Deloitte: average $152,971
• PwC: $114,300 to $231,000
• KPMG: $99,445 to $293,800

But not EY. Here are a few EY roles:

• Accountants and auditors: $54,000 to $390,000
• Computer systems analyst: $62,000 to $367,510
  Management analyst: $49,220 to $337,500

‘Big Four’ salaries: How much accountants and consultants make at Deloitte, PwC, KPMG, and EY

Big 4 firms in India are busy poaching the f out of each other according to Economic Times:

Deloitte is hiring more than 25 partners from EY in advisory businesses-largely cyber, risk, financial services and tech-out of which 13 have joined with the remainder in various stages of negotiations and expected to join in the next few months.

In all, about 50 partners will be joining Deloitte in the next few months, including more than 25 from KPMG.

“Given our robust growth rate and goal to double our business within 3-4 years, we continue to hire talented individuals, including partners spanning various capabilities and industry expertise. We hold a strong bullish stance on the growth of the Indian economy and will maintain aggressive investment,” said Romal Shetty, CEO, Deloitte, South Asia.

Bloomberg went digging around in Trump Media’s auditor’s PCAOB inspection reports:

Trump Media & Technology Group Corp. said in recent regulatory filings that it will keep BF Borgers, a Lakewood, Colorado-based accounting firm, as its auditor after starting to trade publicly late last month. A Canadian regulator said last year that BF Borgers violated its rules for auditors, while the US’s Public Company Accounting Oversight Board found multiple deficiencies in every audit it reviewed from the firm over the past two annual checks.

Its deficiency rate from the PCAOB was worse than the industry rate of 40% in 2022, and the December enforcement action from Canada’s audit regulator prevents it from accepting new clients in that country until it makes certain improvements.

Trump Media said in a statement that articles about BF Borgers’s record were partisan and “preemptively attacking our auditors before they’ve even begun their work for us as a public company.”

How did we miss Withum’s 80 percent deficiency rate? Yikes.

Small or foreign audit firms often have high deficiency rates, and are typically only examined every three years by PCAOB inspectors. However, BF Borgers is a prolific auditor with more frequent examinations. Last year, it ranked No. 8 on a list of audit firms with the most publicly traded clients, with just nine fewer clients than midtier firm BDO USA, according to research firm Ideagen Audit Analytics. Among the 10 busiest auditing firms, Withum Smith+Brown had an 80% deficiency rate and BDO had a 66% rate in 2022, according to the audit regulator.

Wirecard shareholders are suing EY, says Euronews:

Former Wirecard shareholders are suing audit firm EY Germany, accusing it of internal reorganisation and potentially asset stripping it to prevent payouts and compensation in connection with the collapse of the tech payments company.

The company’s collapse in 2020 shook Germany where it had long been the darling of the country’s fintech scene. It filed for insolvency in that year after reporting €1.9 billion ($2 billion) that had been on its balance sheet could not be found.

The fraud cost banks €3.1 billion in loans and write-downs; EY Germany was the company’s auditor.

Wirecard shareholders now fear the internal reorganisation of EY Germany could mean the firm is removing financial assets from the service that could potentially be held accountable for the damage they suffered.