Hey you, you’re finally awake. We’re not going to Helgen, we’re reading accounting news.
In this news brief
Big Government Payday For EY and KPMG
EY and KPMG just scored major contracts across the pond:
The UK government is set to pay consultancies KPMG and EY almost half a billion pounds to train civil servants in the largest deal awarded to Big Four firms in at least a decade.
Just two years after ministers pledged to slash spending on contractors, the Cabinet Office has awarded a contract of up to £456mn to the two firms, according to government procurement data provider Tussell.
Hopefully someone leaks the training later because we’re dying to see how Big 4 is teaching AI to civil servants.
EY Burns Down the Old Intern-to-Associate Pipeline
EY is now doing residencies for audit newbies, reports Business Insider:
EY is betting that an eight-week internship is no longer enough to prepare young workers for the age of AI. [Ed. note: Obligatory “AI”. It’s offshoring that has impacted the early career ladder most at this stage.]
The Big Four firm is launching a new paid “Career Residency” for its assurance interns that will continue for 8 to 12 months after they complete the traditional eight-week internship. Participants will remain employed part-time, work remotely on EY projects, receive personalized coaching, and participate in skills development before potentially joining the firm full-time.
Further down, the article talks about what happens after the residency:
EY’s goal is for successful participants to enter the firm at a more advanced level. New consultants now start as staff. Those who complete the residency and receive a full-time offer would instead join as analysts, which Carlier said would allow them to take on responsibilities they might not previously have handled on day one. Offers will also include a pay bump that will depend on performance, business needs, and completion of the residency’s criteria and assessments.
Yep, things sure are changing fast. If you’re still going around telling young people they’re guaranteed to get an offer after completing an internship as long as they don’t screw up you gotta update your programming.
Oh Goodie More Inspections
After the PCAOB dropped a bunch of inspection reports for the big guys last week (should we go through them in detail? Evidently EY did pretty good), they got around to publishing their first Canadian reports of the year: Deloitte, the largest firm in Canada, and De Visser Gray LLP, a small Vancouver firm we’ve never heard of. Let’s see what Canadian Accountant has to say about them:
As reported by Canadian Accountant, De Visser Gray was censured under the previous PCAOB administration, over repeated use of Canadian Professional Engagement Guide (PEG) audit programs for their US audits. Without admitting or denying the Board’s findings, the firm settled with the PCAOB and consented to a disciplinary order that imposed a civil penalty of $60k, as well as remedial action.
Yeah you don’t want the PCAOB to catch you pegging.
Because these are PCAOB inspections the Canadian firms had to declare any conflicts of interest. It’s not surprising Deloitte had a non-zero number, always gonna be something in a firm that size:
[W]hile De Visser Gray did not disclose any instances of apparent non-compliance, Deloitte Canada voluntarily divulged that a member of one audit team had investments its audit clients. The firm also reported one “instance related to services provided by the firm that the lead auditor determined to be prohibited, which consisted of bookkeeping services for a company that was an affiliate of an issuer audit client of an associated firm.”
Neither firm racked up any significant deficiencies of the small handful of audits inspected.
Greed, Stupidity, and Arrogance
The Australian government is busy trying to prevent another Big 4 scandal and one of the things they’re batting around is separating audit and consulting. Hmm where have we heard that before…?
Academic Stephen Taylor has an opinion on this that he wrote up for Australian Financial Review:
Take, for example, the structural separation of audit from other services. Advocates argue this will improve audit quality, but rarely specify “how”.
Some argue this will improve auditor independence, but surely limiting the provision of other services to audit clients addresses this, rather than limiting the ability to sell these services to firms that are not audit clients.
So, what is the real “problem”?
If the current KPMG drama is informative, I suggest we call this GSA: greed, stupidity and arrogance! Greed motivates how firms approach competition, leading to behaviour that, in hindsight, looks downright stupid, which leaders then deal with in a way that reflects arrogance.
Proposed audit reforms need to be evaluated by the extent to which they are likely to address the problems identified in the KPMG scandal – in this case, GSA.
For the record, KPMG also opposes splitting off audit and consulting. Or rather, they oppose the government making them do it.
If you missed the government paper the first time around (lucky you), you can find it sort of TLDR’d and embedded in full in the article below:
Another Day, Another Municipal Mess
One of Wipfli’s municipal clients made the news in Bangor:
The Washington County Commission pushed back Thursday against steep 2027 budget increases after accepting the 2023 audit, which showed the county ended that year $1.2 million in the red.
Finance Director Jenny Windsor, who was hired in April, told commissioners the fiscal year 2023 audit was completed on schedule at the end of July and showed a $1.2 million net loss.
“It wasn’t much of a surprise to anybody,” she said, noting that audits from 2019 through 2022 also showed net losses.
Windsor said the losses appeared in audit reports year after year, adding, “So the position that the county ended up in in 2025 — you all were surprised, but it should not have been a surprise had these audits been done timely.”
We see you, Jenny. And can hear you banging your head against the wall from over here.
As with prior audits, this year’s auditor, Wipfli, found inadequate accounting records and commingled funds; slow or missing account reconciliations, including cash reconciliation; poor documentation for bank transfers; no accounting policies and procedures manual; weak controls over processing and recording financial transactions; inadequate grant tracking; no accounting of capital assets; inadequate cash flow; and repeated expenditures that exceeded budget appropriations.
The prior auditor, Stephen Hopkins of Scarborough, tried to tell them. You can lead a horse to water and all that. Maybe Wipfli will have better luck getting through to them.
A Sustainability Story
Do you still care about sustainability? You might like this one. Not like like, but it’s a topic you enjoy. Here’s a little something about cocoa farms in Côte d’Ivoire:
A study of cocoa farms in Côte d’Ivoire, the world’s largest cocoa-producing country, has found that sustainability monitoring can be vulnerable to manipulated data. The researchers say their findings raise serious questions about how reliably companies and certification schemes can verify claims about the environmental and social standards behind products such as chocolate.
Sustainability audits are supposed to give food and beverage companies confidence that the claims they make about their supply chains can withstand scrutiny. However, the ETH Zurich research into cocoa farming suggests the audit process itself can create an incentive to produce the “right” answer.
The findings could have particular significance for companies preparing to comply with the EU Deforestation Regulation, which requires companies to demonstrate that commodities, including cocoa, sold in the EU are not linked to deforestation or forest degradation worldwide.
Not an Audit You Want to Be Sent On
Baker Tilly Ukraine (didn’t realize that was a thing) got a new government contract:
The Supervisory Board of Ukraine’s Defense Procurement Agency has engaged Baker Tilly Ukraine to conduct an independent financial audit of the agency for 2025.
According to the agency’s press service, Baker Tilly Ukraine was selected as the winner of a tender to conduct the audit.
“The audit will provide an independent assessment of the Agency’s financial reporting, compliance with financial discipline and efficiency of resource use,” the agency said on Facebook.
Here’s a bit on the drama happening within the Defense Procurement Agency.
We’ll end this here, pretty sure you guys don’t care to read another half a dozen articles about some township with disastrous financial records. Email or text if you have a tip or story, I always appreciate getting the heads up on things I may have missed. Have a good week!
