Yesterday, we reported that KPMG was providing ample protein to its partners and employees this summer as a way of saying, "Thanks for all your hard work and not passing material non-public information to someone outside the firm who then used that information to make trades in our audit clients' stock." And for the most part, Klynveldians seem to appreciate the opportunity to consume some quality Nebraska flesh courtesy of the firm.
When it comes to rewards for all your hard work, there's a distinct hierarchy. A few co-dependent Millennials who might prefer a pat on the head with a scratch and sniff sticker aside, I think everyone can agree the #1 reward for a job well done is obviously money. Lots and lots of money. Bonuses, fat paychecks, raises and even $100 gift cards will do (unless they are presented in this fashion).
From EY Houston OMP: "To start the summer and in addition to "Jeans Fridays", beginning tomorrow (Friday, June 7), we will be stocking the freezers on each floor with Popsicles and ice cream bars! If you are in the office, please help yourself to these complimentary treats!"
sweet.
Indeed!
When they say "ice cream bars," are they talking those really good Snickers ones or the cheap chocolate-coated ones that fall apart before you can get halfway through it on a hot day? Inquiring minds must know.
If anyone could please raid the freezer tomorrow for us and report back, it would be appreciated. Yes, it really is that slow of a week. And we're hungry.
UPDATE: We're being told that the quality of frozen treats is high:
EY Houston frozen-treat update: freezer contents this morning are all good Blue Bell stuff: Krunch bars, ice cream sandwiches, rainbow pops. Breakfast of champions.
It’s been awhile since we’ve heard any news on the E&Y comp front but we finally received a preliminary report from one source late last week:
[Roundtables] went the same way they always go. Surprisingly, less pushback on proposed ratings for the portion I was involved in. I really think they may be scared to lose more people. Indications are raises will be low (3-5% range for most, more for 4/5 rated people) Bonuses are probably non-existent for the masses. Annoucements of promotions for other levels will be made in August (staff to senior, senior to manager, manager to senior manager) they will also do comp increase discussions then. Effective 10/1…
On a marginally-related note, we’ve received word that the partner promotions were announced but we’re still trying to run down some details. Get in touch with us if you’ve got the scoop on the new partners, what you’re hearing about comp in your office and discuss below.
UPDATE, Wednesday June 16th: A couple more accountants familiar with E&Y have their own take on the comp situation:
I heard that we “we’re not going to be disappointed with raises” here at EY. I don’t know what that means. And I tend to believe, that as you posted today, 3-5%, is a more realistic view of what’s going to happen (though that’s just my own pessimism).
and that is coupled with another source, “Haven’t heard anything further on comp other than ‘moderate.’
Continue attempting to decipher the latest. As you were.
~Update 2 includes statement from Claudius Modesti, PCAOB Director of Enforcement and Investigations
Today in obscure accounting oversight board enforcement actions, an Ernst & Young Manager in the Boston office was censured by the PCAOB for repeated violations o y to Cooperate with Inspectors, and Auditing Standard No. 3 (“AS3”), Audit Documentation.
The violations occurred when 27 year-old Jacqueline Higgins “(1) added documents to the working papers without indicating the dates that documents were added to the working papers, the names of the persons preparing the additional documentation, and the reason for adding the documentation months after the documentation completion date; and (2) removed a document from the working
papers after the documentation completion date.”
The timeline goes like this: E&Y was given notice by the PCAOB that an inspection of the unknown company’s audit was being performed on March 30, 2010 and the partner, senior manager and manager on the engagement were given notice on March 31, 2010. The inspection fieldwork was set to begin on April 19, 2010.
On April 5th, the three Ernsters began preparing for the inspection and that’s when problems started cropping up which led to more trouble. The order has the details:
First, Respondent reported to the Engagement Partner and the Senior Manager that a “Review Procedures Memorandum” was missing from the external working papers. The Engagement Partner and the Senior Manager directed Respondent to create and print out the missing document, and to backdate the document to November 30, 2009. The Engagement Partner and the Senior Manager directed Respondent to backdate her sign-off on this working paper to November 30, 2009, and to add this document to the external working papers.
17. Second, Respondent reported to the Engagement Partner that the tie-out of the financial statements contained in the external working papers was performed upon a pre-final set of financial statements. The Engagement Partner directed Respondent to remove this document from the external working papers, and to replace it with a newly created document which tied-out the final financial statements, and which the Engagement Partner directed Respondent to backdate to November 2009.
18. Third, Respondent reported to the Engagement Partner that the Average Forward Foreign Currency Contracts Calculation (“A3a Working Paper”) was missing from the external working papers. The Engagement Partner directed Respondent to gather the missing document, backdate it to November 2009, and add it to the external working papers.
19. Finally, Respondent reported to the Senior Manager that three checklists were missing from the external working papers. The Senior Manager directed Respondent to assemble the missing checklists as a single document (“HH6.8 Working Paper”) and to backdate her sign-off on this working paper to November 2009. The Senior Manager directed Respondent to add the document to the external working papers. The Senior Manager and Respondent reported to the Engagement Partner the facts and circumstances related to the creation of the HH6.8 Working Paper, and the Engagement Partner took no steps to cause the document to be properly dated, or to have it removed from the external working papers.
So those are the wonky details. Where this particular story is most interesting (in our opinion) is that Ms Higgins was, prior to this little mishap, on the fast track. According to the order, she graduated in May of 2005 and started with E&Y in September. She was promoted to senior associate in October of 2007 and then promoted to manager in October of 2009. Now, perhaps she was an audit-savant or perhaps not but in just over four years, she was a manager, which is a much quicker pace than usual.
Granted, she was still under the supervision of the senior manager and partner on the engagement but a young manager nevertheless. Now, you might be asking yourself, “what about the senior manager and partner? Are they getting their wrists slapped?” Conventional wisdom tell us, “absofuckinglutely” but the PCAOB isn’t saying. We were told by a spokesperson that the Board cannot comment on any other action related to this case.
As far as what a censure by the PCAOB actually entails, we were told that “It is an official reprimand from the PCAOB.” Some might call it a wrist slap but we’re damn sure you don’t want that in your file when you’re 27 years old. The action also states that Ms. Higgins was removed from the engagement in July 2010 and “at that time Higgins ceased participating in issuer audit engagements.”
Messages with E&Y spokesperson Charles Perkins and A message left with an attorney for Ms. Higgins were not immediately returned.
Ernst & Young has issued the following statement:
Our firm policy clearly prohibits persons from supplementing audit workpapers in circumstances like those described in the disciplinary order. When we determined that firm policy had been violated, we put the three individuals involved on administrative leave and subsequently separated the partner and senior manager. We have advised the PCAOB of these facts and have cooperated fully with the PCAOB throughout its investigation of this matter.
Based on the above, you might conclude that more disciplinary action will be coming from the PCAOB but like we said, they’re not talking.
UPDATE 2 – circa 3:30 pm: Claudius Modesti, PCAOB Director of Enforcement and Investigations, explained the seemingly light punishment in an email to Going Concern:
As to the censure, under the facts and circumstances, the censure is appropriate given Higgins’ relatively junior position on the audit team and her overall role in the conduct. We also considered the fact that she settled the matter without requiring the Board to commence litigation, which would have been nonpublic as required by the Sarbanes-Oxley Act.”
It was then explained to us that the PCAOB has never explained a disciplinary action in this way: “We also considered the fact that she settled the matter without requiring the Board to commence litigation, which would have been nonpublic as required by the Sarbanes-Oxley Act.”
If that’s not quite clear, consider this: It is significant because, had Ms Higgins acted in the alternative (i.e. not settled), litigation would have been necessary and no one outside of the PCAOB, Higgins, her lawyers and E&Y would have known about the proceedings. Granted, it’s fairly common for lighter disciplinary action to result from a settlement but it also makes sense from a PR perspective (not to mention, transparency and investor protection) if the PCAOB can actually announce that they are taking action against people who break the rules. Part of the challenge the Board has faced is convincing anyone that they have teeth.
It will be interesting now to see if the senior manager and partner follow the same track as Ms. Higgins and how the PCAOB will respond to their cooperation (or lack thereof).
