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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
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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.