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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.
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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.