Accounting News Roundup: KPMG Quits on Another Chinese Client; PwC Fined Over Commingling at JP Morgan; Dissecting Romney’s Tax Plan | 01.06.12

Posted on by Caleb Newquist

KPMG Quits as China Forestry Auditor, Deepening Concerns About Accounting [Bloomberg]
China Forestry Holdings Co. (930), the Chinese timber company whose shares have been suspended since January last year because of accounting irregularities, said its auditor KPMG LLC resigned citing valuation concerns. China Forestry needs to verify the ownership and valuation of its plantations and log inventories, a statement yesterday from the Beijing-based company cited KPMG as saying. The former auditor also said it was still awaiting results from a broader probe into the irregularities it identified last year.

PwC hit with record fine for UK audit failures [Reuters]
Top auditor PricewaterhouseCoopers has been fined a record 1.4 million pounds ($2.2 million) in Britain for wrongly telling local regulators for seven years that JPMorgan Securities was keeping client money safe. The case brought by the Accountancy and Actuarial Discipline Board was the latest sign regulators have been taking a harder line on auditors, seen by policymakers as being too soft on banks in the run-up to the financial crisis. The AADB said on Friday PwC, one of the world's so-called "Big Four" auditors which check the books of nearly all blue-chip companies, admitted it failed to obtain "sufficient appropriate evidence" to report JPMorgan Securities complied with strict client money rules over several years. Most of the client money from futures and options trading was being "swept" daily into interest-bearing, unsegregated accounts overnight at JPMorgan Chase bank, the firm's parent, the AADB said.
 
Woodford to sue Olympus over firing, drops CEO bid [Reuters]
he ousted British CEO of disgraced Olympus Corp, who blew the whistle on a $1.7 billion accounting fraud, dropped his bid to return to lead the medical device maker, blaming cozy ties between its management and big Japanese shareholders and saying the saga had taken its toll on his family. Michael Woodford's campaign against its management rocked the once-proud maker of endoscopes and cameras, but failed to win over Japanese institutional shareholders including Olympus' main lenders, who support a board that has been castigated for insufficient oversight. "Despite one of the biggest scandals in history, the Japanese institutional shareholders have not spoken one single word of criticism, in complete and utter contrast with the overseas shareholders who were demanding accountability," Woodford told a news conference in Tokyo on Friday.
 
KPMG plans timely return of MF Global assets [Reuters]

MF Global UK administrator KPMG plans to start returning to clients the $1.2 billion of cash and assets frozen at the defunct broker as early as this month in a move that will placate customers ahead of their showdown with KPMG next week. Richard Heis, joint special administrator of MF Global UK, told Thomson Reuters on Thursday the administrator had recovered the majority of client monies and almost all outstanding client assets, and hoped to start returning these to owners shortly. "At the end of December we had recovered some 82 percent of client monies and substantially all of the client assets. We hope to commence the return of client assets and an interim distribution of monies as early as this month," Heis said.

Satyam auditor, CFO found ‘guilty [Times of India]
Nearly three years after the Satyam scam broke out, the Institute of Chartered Accountants of India (ICAI) has finally found Vadlamani Srinivas, erstwhile chief financial officer (CFO) of Satyam Computers, and Talluri Srinivas, former partner of PriceWaterhouseCoopers (PWC), then statutory auditors of Satyam, guilty of professional misconduct. According to G Ramaswamy, president, ICAI, while Vadlamani was found guilty of not conducting proper due diligence, Talluri was held guilty for not complying with professional standards. "The high powered disciplinary committee found both Vadlamani and Talluri guilty of professional misconduct. We will give them a final opportunity to defend themselves after which a final hearing will be held this month and the punishment determined," he explained. 

Mazars fees grow 8.2% in 2011 [Accountancy Age]
Fees reached €957m for 2010/2011, with 6.9% income growth from services to public interest entitites and a 7.5% increase in fees from tax activities. The overall growth was achieved through a 3.4% increase on a constant basis, with external growth delivering 4.8%. he firm has also updated its governance structure. President and CEO Patrick de Cambourg is named chairman, and will sit on the firm's group governance council which includes two independent members: Denise Fletcher and François de Carbonnel. Douglas A. Phillips, managing partner of WeiserMazars, is vice chairman along with Pierre Sardet.

Romney’s Tax Plan: Big Benefits for the Wealthy and Higher Deficits [TaxVox]
Howard Gleckman: "Romney says he’d rewrite the entire tax code–someday. But he doesn’t say how or when. Until he does, a Romney Administration’s revenue agenda would look a lot like President George W. Bush’s, just more so."
 
The GOP's Weird Obsession With Poor People Not Paying Enough Taxes [The Atlantic]
Step it up, poors. 
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Accounting News Roundup: IRS Probing HSBC Clients with Accounts in Asia; Saints Deny State Money Was Taxable; Pot Tax Helps Helps Another California Budget | 07.07.10

HSBC Clients With Asian Accounts Said to Face Probe [Bloomberg BusinessWeek]
“The Justice Department is conducting a criminal investigation of HSBC Holdings Plc clients who may have failed to disclose accounts in India or Singapore to the Internal Revenue Service, according to three people familiar with the matter.

‘This is a global initiative by IRS and the Department of Justice,’ said Robert McKenzie, an attorney at Arnstein & Lehr in Chicago who said he spoke to two people who got letters.

The probes show how the U.S. is expanding its crackdown on offshore tax evasion beyond Switzerland and UBS AG, the largest Swiss bank, sa tax lawyer at Greenberg Traurig LLP in New York. London-based HSBC is Europe’s biggest lender by market value.

‘It’s clear that the IRS and the Department of Justice are intending to pursue other depositors outside of Switzerland,’ Kaplan said. ‘They’ve announced it before, and they are moving forward in that regard.’ “

A.T. Kearney, Booz Call Off Merger Talks [WSJ]
“A.T. Kearney Inc. and Booz & Co. called off discussions about a possible merger that would have given the two midsize firms greater scale in a highly competitive industry.

The two have flirted with each other multiple times over the years without completing a deal. The most recent talks occurred on and off over the past six months, says a person familiar with the matter.

The combined firm would still have been smaller than market leaders such as Deloitte LLP, McKinsey & Co. and Accenture Ltd in an industry where scale is increasingly important in wooing global business.”


Did Tax Ploy Help Saints Win Super Bowl? [Forbes]
If you feel so inclined, you could probably blame this on Reggie Bush but otherwise it’s probably due to some clever tax attorneys, “In a just-filed U.S. Tax Court lawsuit, the partnership owning the Saints acknowledges that it didn’t treat an $8.5 million annual payment from the state of Louisiana as income and therefore didn’t pay taxes on the sum. Rather, the team said the money was an addition to “working capital” and a nontaxable transaction.

The Internal Revenue Service insists the money should have been included in income by the franchise, owned for a quarter-century by auto dealer Thomas M. Benson Jr. The Tax Court case challenges that position.”

Pot Tax Helping Long Beach Plug Budget Deficit Faces Vote in California [Bloomberg]
“The city council of Long Beach, California, voted last night to pursue taxes on medical marijuana dispensaries, part of what may become a wave of communities turning to such proceeds to plug budget deficits.

The Los Angeles suburb with a population of almost 500,000 scheduled a public hearing on the drug levy for Aug. 3. If the council later approves the wording, a ballot initiative establishing a 5 percent tax on the city’s 35 dispensaries could go to voters in November, according to Lori Ann Farrell, Long Beach’s director of financial management.”

IRS Disbars CPA for Relying on Client’s Income and Expense Numbers [Tax Lawyer’s Blog]
How much due diligence should a tax preparer perform to be comfortable with their clients numbers?

Ex-Qwest Accountant Says SEC Should Be Sanctioned [CBS4]
“The SEC has said [James] Kozlowski hasn’t shown that it acted in bad faith. It has accused him of ‘theatrical conduct,’ including filing ‘numerous losing motions.’ Kozlowski’s attorneys dispute that.”