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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
Why accountants won’t become ‘AI’s lapdog’ [Financial Review]
It was a daunting brief: create a 60-second social media clip that makes accounting great again. The challenge was part of a $10,000 University of NSW business school competition, and designed to encourage more students to take up the increasingly unpopular accounting major. It was a daunting brief: create a 60-second social media clip that makes accounting great again. UNSW student Zi Teng Lim won first prize and $5000. He said he wanted to correct the misunderstanding held by many that accounting is boring and repetitive in his clip. “Accounting is a good major to take if you want to start a business, it’s the foundation of everything,” Mr Lim told The Australian Financial Review.
The winning video:
Earlier: You Couldn’t Pay Me Enough to Make Accounting Sound Cool
Video of Diwali celebrations at EY Gurugram office goes viral [India Today]
A video of Diwali celebrations at Ernst & Young’s (EY) Gurugram office has gone viral on social media after an employee shared a glimpse of it in an Instagram post. The video, which was shared by CA Sneha Chanchlani, shows employees celebrating Diwali with everybody dressed in ethnic attire. The video has garnered over 1 million views on Instagram. Several social media users conflated, rather unfairly, the celebrations with the death of a former employee, which triggered a huge controversy.
The video:
Earlier: Mother Pens Letter Calling Out EY After Her Overworked Daughter Suddenly Passed Away at 26
Firm Watch
BDO ordered to pay $5mn to Jay-Z accountant in unfair dismissal case [Financial Times]
BDO has been ordered to pay more than $5mn in damages to Jay-Z’s former tax adviser, who said he was unfairly dismissed for disclosing confidential information to celebrity clients who accused a firm employee of stealing money. Kashyap Bakhai, a BDO partner with 35 years of experience advising wealthy individuals including sports stars and entertainers, was fired almost two years ago when the accounting firm was dealing with accusations that the employee dipped into client accounts for personal use, according to people familiar with the dispute and legal filings.
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.”
CBIZ Completes Acquisition of Marcum [PR Newswire]
Concurrent with the closing of this transaction, the attest business of Marcum was acquired by CBIZ CPAs, a national independent CPA firm with which CBIZ has had an Administrative Service Agreement for over 25 years. The cash-and-stock transaction is valued at approximately $2.3 billion. More information about this transaction can be found at cbiz.com/stronger-together.
Earlier: Turns Out The Tipster Who Said Marcum and CBIZ Are Merging Wasn’t a Troll After All (UPDATE)
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.
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