ANR: Accounting Pitfalls for U.S. Business in China; FRC Investigating Autonomy; Leave Tax Enforcement Dollars Alone! | 02.11.13

Posted on by Caleb Newquist

Accounting risk clouds big U.S. business bets in China [Reuters]
Tales of shady business practices abound in China – fake revenues, phony invoices, sham factories – but until recently, the problem seemed confined mostly to Chinese companies. No longer. Concern is growing about risks to U.S.-based multinationals in a country where American audit regulators are locked out by the Chinese government and bribery and fraud are routine. Questions about transparency and integrity weigh heavily on China, the world's second-largest economy, as it assumes greater economic leadership and responsibility. These doubts test its ability to adhere to international standards.

UK accounting body investigates Autonomy [FT]

The Financial Reporting Council, which sets UK standards for accounting and auditing, said on Monday it had decided to investigate after consultation with the Institute of Chartered Accountants in England and Wales, which represents 140,000 chartered accountants. The investigation will cover Autonomy’s accounts from January 1 2009 to June 30 2011, three months before the HP acquisition.
 
Canada Seeks to Unify Professional Accounting Bodies under CPA Designation [AWEB]
Canada's three national accounting bodies have joined together to create a new, national accounting body, the Chartered Professional Accountants of Canada (CPA Canada), which will issue the professional designation: Chartered Professional Accountant, or CPA. The CPA designation is intended to delineate the nation's professional accountants from other accountants and be accepted as an internationally accepted credential. 
 
Are Wages About to Start Rising? [At Work/WSJ]
Computer programmer, accountant, mechanical engineer: If you had kids in college these last few years, you probably encouraged them to enter fields of study that landed them in one of those jobs, which were among the strongest bets in a weak labor market. Yet despite the steady demand for—and low jobless rates among—these professionals during the recession and the first years of recovery, those fields experienced little wage growth between 2007 and 2011, according to data from the Labor Department. That’s finally starting to change. Earnings for those three occupations and a number of others cited in various surveys gauging the “war for talent” started to experience notable growth in 2012, the government data shows. Wages rose 3.4% from 2011 to 2012 for full-time workers in computer and mathematical occupations, 5.1% for accountants and auditors, 7.5% for electrical engineers, and 4.4% for mechanical engineers.
 
The SEC's Revolving Door [POGO]
A revolving door blurs the lines between one of the nation’s most important regulatory agencies and the interests it regulates. Former employees of the Securities and Exchange Commission (SEC) routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law. POGO’s report examines many manifestations of the revolving door, analyzes how the revolving door can influence the SEC, and explores how to mitigate the most harmful effects.
 
KPMG To Donate 5,000 Books To Children In Need For Each Phil Mickelson And Stacy Lewis Tournament Win In 2013 [KPMG]
Seems like a better idea than relying on Phil to stick chip shots in a football stadium.
 
PCAOB’s Franzel Sees Progress on China Audit Inspections [AT]

The PCAOB has been signing audit firm inspection agreements with other countries, including France and Finland earlier this month, but China has remained a sticking point, particularly when it comes to inspections of Chinese companies that are trading on U.S. markets by doing a reverse merger with a U.S. shell company. “Unfortunately we have seen a lot of fraudulent activities in those companies, and beginning in 2010 and since then, about 67 of those companies have had their auditors actually resign, and 126 of those issuers have either been delisted from the U.S. exchanges, or they’ve gone dark and are no longer tapping into capital,” said [Jeanette] Franzel. “We don’t know how many more are out there and may need to remove themselves from the U.S. markets. Both we and the SEC are trying to negotiate with the Chinese government right now. We’ve been negotiating for quite some time, so there could be some more out there. It is a serious issue for investors who have invested in these companies if we and the SEC do not have oversight, so we continue to work on that.”

Law and Order: Tax Squad [Tax Notes via TaxProf]
[David Cay] Johnston discusses why it is a bad idea to cut dollars from tax enforcement, and he is skeptical that declining numbers of criminal tax prosecutions are the result of increased voluntary compliance.

Paying Them Back [WSJ]
Thanks to medical and technological advances, people are living longer—but more of them are outliving their savings. That is prompting their children to transfer assets to their parents, say private bankers, trust attorneys and accountants. The strategy is counterintuitive, and can invite huge tax bills and other financial hazards. Yet there are many different options available to adult children, ranging from paying bills and giving money directly to making intrafamily loans. There are even innovative "upward" trusts specially designed to transfer assets to the older generation.

Blue Ribbon Bacon Festival In Iowa Sizzles With Pork-Loving Pride [AP]
The smell of bacon was in the air Saturday as thousands converged on Iowa's capital city for an increasingly popular festival celebrating all things connected with the meat. Some people wore Viking hats and others walked around with makeshift snouts for the Blue Ribbon Bacon Festival. The annual event featured more than 10,000 pounds of bacon served in unusual ways, such as chocolate-dipped bacon and bacon-flavored cupcakes and gelato. "I love bacon more than I love my job," said Katie Nordquist, who was dressed in a tuxedo T-shirt that looked like bacon Saturday for her first time at the festival.

 
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Accounting News Roundup: Olympus Under the Lens; Paterno’s House Sale; BDO Tax Shelter Case’s Shady Juror | 11.16.11

Purgatory for MF Global Customers [WSJ]
More than two weeks after MF Global filed for Chapter 11, some 33,000 customers are stuck in a sort of purgatory, with no access to their cash until a trustee liquidating the securities firm says they can get it. Late Tuesday night, the office of the trustee, James Giddens, in an apparent response to customer outcries, said he had sought court permission for a transfer of about 60% of the cash in about 21,000 customer accounts still frozen, or some $520 million. If he gains court approval, the statement said, distributions could be made within days. Earlier in the day,owledged customer “frustration” and sought court approval to expedite a claims process. A spokesman for the trustee said this week it is possible customers won’t get all their money back, due to the apparent shortfall at MF Global.

Olympus seeks to reassure lenders [FT]
Olympus is seeking to reassure its lenders that it has sufficient cash flow to repay its loans, in an effort to ensure continued financial support as it faces investigations into a cover-up of large losses related to past securities investments. Lenders including Japan’s three leading banks – Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho – and country’s largest life assurer, Nippon Life, met with Olympus on Wednesday.

UK’s SFO launches formal Olympus probe [Reuters]
Britain’s Serious Fraud Office (SFO) has launched a formal investigation into more than $1.0 billion of obscure payments and acquisitions made by Japan’s Olympus Corp., a source familiar with the matter said.[…] Olympus’s former chief executive Michael Woodford, a Briton who fled Japan around a month ago after blowing the cover on around $1.3 billion in unexplained fees and non-core acquisitions, promptly handed reams of documents to the agency.

Paterno Passed On Home to His Wife for $1 [NYT]
Lawrence A. Frolik, a law professor at the University of Pittsburgh who specializes in elder law, said that he had “never heard” of a husband selling his share of a house for $1 to his spouse for tax or government assistance purposes. “I can’t see any tax advantages,” Frolik said. “If someone told me that, my reaction would be, ‘Are they hoping to shield assets in case if there’s personal liability?’ ” He added, “It sounds like an attempt to avoid personal liability in having assets in his wife’s name.”


Daugerdas Judge Grants Hearing on Juror Conduct in Tax Case [Bloomberg]
U.S. District Judge William Pauley in Manhattan said today he will hold an evidentiary hearing on the conduct of Catherine Conrad, Juror No. 1 in the 10-week trial. He didn’t set a date. The defendants claim Conrad hid details of her background from the court, including a law degree, at least four arrests and the fact that she was serving a sentence of probation for shoplifting. The jury, including Conrad, convicted [Paul] Daugerdas in May on more than 20 criminal counts, including conspiracy, tax evasion and attempting to impede the Internal Revenue Service. The jury also returned guilty verdicts for Denis Field, the former chief executive officer at accounting firm BDO Seidman LLP; Donna Guerin, a Jenkens & Gilchrist lawyer; and David Parse, a former accountant for Deutsche Bank AG (DBK) unit Alex. Brown.

H&R Block drops TaxACT acquisition plan after antitrust opposition [KCBJ]
H&R Block Inc. has dropped its $287.5 million plan to buy the maker of TaxACT tax preparation software. In a Tuesday filing with the Securities and Exchange Commission, the Kansas City-based tax preparer (NYSE: HRB) said involved parties had agreed to terminate the merger agreement, effective Monday.

Accounting News Roundup: Talking Corporate Tax Reform; PwC’s Audit Committee Questions; Swipe That Refund | 01.14.11

Groupon Talks IPO [WSJ]
Investment bankers have been making proposals to online deals site Groupon Inc. about a proposed initial public offering for the past week through an informal “bake-off,” people familiar with the matter said. Groupon, which turned down a $6 billion takeover offer from Google Inc. last year and said it would raise $950 million in funding, has been planning its public debut for later this year, these people said. An IPO is likely “sooner rather than later,” and most likely to be this fall, one of the people familiar with the matter said.

E&Y named most gay-friendly accountancy firmAccountancy Age]
E&Y ranked third on the UK national list of 100; Deloitte came in at 90. PwC and KPMG were MIA.

Talks on Corporate-Tax Revisions Set to Start [WSJ]
The drive to revamp corporate tax rules kicks off in earnest on Friday, when Treasury Secretary Timothy Geithner sits down with executives of more than a dozen major U.S. companies. One likely focus of the discussions will be finding ways to use an overhaul to encourage more investment in the U.S. “We have to create stronger incentives for investment in the United States, both by American and by foreign companies,” Mr. Geithner said in a speech this week.

For Same-Sex Couples, a Tax Victory That Doesn’t Feel Like One [NYT]
A decision in May by the Internal Revenue Service that was hailed as a step toward equality for same-sex couples has instead become a headache for tens of thousands of gay and lesbian families in California. Same-sex couples who are registered domestic partners — or who married during the brief legal window — are facing a new, more complicated tax status, one that has raised a litany of expensive concerns. Many of these families will now have to pay for professional help to file by April 15.

PwC provides top 10 questions for audit committees [AW]
PwC US’s Center for Board Governance has announced its annual list of questions and insights to help audit committees oversee their companies’ 2010 year-end financial reporting process. Topics covered include: accounting and disclosure matters, the impacts of the proposed SEC rule for a whistleblower bounty program, antitrust and anticorruption compliance, tax reform, and ongoing standard setting, and regulatory matters, among others.

IRS to Offer Tax Refunds on Visa Debit Cards [TaxProf Blog]
Spend away!

Former ’30 Rock’ accountant charged with embezzling from NBC [NYP]
Matthew Rudolph was awaiting arraignment in criminal court Thursday on 22 counts of grand larceny, falsifying business records and possession of a forged instrument. Queens district attorney Richard Brown says Rudolph forged two checks made out to himself and used his company credit card for personal use, stealing a total of about $14,000.

AT&T Takes $17 Billion Charge for Pension Change [Bloomberg]
The company will deduct $2.7 billion, or 28 cents a share, in non-cash expenses in the fourth quarter, Dallas-based AT&T said in a regulatory filing today. AT&T is changing how it recognizes gains and losses for funds that pay for pension and other post-retirement benefits. “Investors shouldn’t lose sight of the real economics just because of the accounting,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. who rates AT&T shares “neutral” and doesn’t own them. “The real economics are based on the size of the liability regardless of how it’s accounted for, and this is a massive liability.”

Ways and Means schedules first tax reform hearing [On the Money/The Hill]
January 20th. 9 am. Be there.