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December 3, 2022

Accounting News Roundup: Auditor IQ Matters | 09.04.15

Defense to Rest in Trial of 3 Ex-Dewey & LeBoeuf Leaders [DealBook]
Matthew Goldstein writes that attorneys for the Dewey execs are feeling pret-tay pret-tay pret-tay good:

The lawyers for three former executives of Dewey & LeBoeuf must feel confident that prosecutors have failed to prove that the men used accounting gimmicks to defraud lenders and creditors of the once-prominent New York law firm.

The defense team plans to formally rest its case on Tuesday without calling a single witness to testify in the criminal trial, which began in late May. The lawyers are also expected on Tuesday to renew a request for the judge to dismiss the case.

The thinking goes that prosecutors haven't proved their case beyond all reasonable doubt. Sure, they might be overconfident, but I'll go in another direction and speculate that the subject matter might have been a problem:

[T]he decision by the defense team not to call any witnesses is a bit of a surprise given that prosecutors working for Cyrus R. Vance Jr., the Manhattan district attorney, have called more than 40 witnesses during weeks of often-tedious testimony about law firm accounting procedures.

Yes, when your case relies on the mind-numbing intricacies of partnership accounting, it could be that the jury's attention was anything but rapt. Deliberations are expected to start next week.

Yes, an Auditor’s IQ Score Really Matters [CLSBSB]
Via Matt Levine, here's one of the strangest things you'll read about auditors today:

Not surprisingly, cognitive abilities predict many economic and social outcomes such as salary, job complexity, or success in investment decisions. What is surprising, however, is that almost all auditing research analyzing archival data on audit outcomes has assumed that all auditors are equally good at their work.

The most hilarious aspect of this is that a case had to be made that all auditors are NOT robots:

[W]e relax the assumption of homogenous auditors and argue that some audit partners within the audit firm are more able than others. We moreover argue that the more capable auditors are perceived as higher-quality auditors by their clients.

Don't worry, as the title suggests, their data found that "IQ really matters in auditing."

AICPA Continues to Promote the Urban Tax Myth [WTP]
Tax blogger Robert Flach got wind of Greg's AICPA vs. Dear Abby post and didn't mince words: "His statement 'None are more qualified than CPAs' is an out and out lie. There is absolutely nothing about possessing the initials CPA that in any way, shape, or form guarantees that the possessor knows his or her arse from a hole in the ground when it comes to 1040 preparation."

KPMG ends PwC's 11-year audit reign at Premier Foods [Accountancy Age]
Meanwhile, in the UK, non-audit fees paid to audit firms can still be pretty outrageous: "Non-audit fees for the financial period were £567,500 – representing some 133% (2013: 71%) of the annual audit fee. Of this, £505,000 related to its capital refinancing plan. Total auditor remuneration was £900,000, of which some £400,000 was for the audit itself."

Subways won't be in good condition until 2067, report says [AMNY]
Earlier than you thought, wasn't it?

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