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Accounting News Roundup: Bad Audits and CPA Exam Study Games | 11.01.16

SEC enforcement

Here's a story about PKF O'Connor Davies having a little run-in with the SEC. The firm audited financial statements for the Town of Ramapo, New York's municipal bond issuances but there was a small matter of a big receivable that really wasn't actually receivable:

According to the SEC, the firm and its partner, Domenick F. Consolo, permitted the town to record a $3.08 million receivable in its general fund for a property sale that didn’t actually happen. The auditor allegedly ignored red flags and relied upon what turned out to be false representations by Ramapo officials about other receivables, interfund transfers and liabilities. The SEC contends that PKF O’Connor Davies failed to take the appropriate steps to mitigate the risk of material misstatements even after senior management at the firm found out that Ramapo’s financial statements were the subject of multiple law enforcement investigations and Consolo received complaints about possible fraud.

Okay, so there are some interesting bits here — First, according to the SEC order, that receivable was 75% of the Town's General Fund and the property couldn't be sold, at least for a time, "because a habitat for timber rattlesnakes, a threatened species, was located on the land."  Also, an audit manager "wrote in a contemporaneous email" that "No one wants to give the ok for this, but Dom [Consolo] said go ahead and book it.”

And finally, the firm's response is somewhat curious. The Town of Ramapo, its local development corporation and four officials were charged with fraud earlier this year yet, the firm seemed a little defiant:

PKF O’Connor Davies defended its audits. “We stand by the integrity of our work with the Town of Ramapo,” said a statement forwarded by outside spokesperson Shelly Orlacchio. “We feel strongly that a continued back and forth with regulators would only expend valuable firm resources and divert focus from our ongoing business and growth goals.  We’re confident what we learned through this process will provide valuable insights that will benefit our municipal clients moving forward.”

One of those benefits being, I assume, not to commit fraud when you're issuing muni bonds.

Elsewhere in SEC enforcement: A PwC partner was charged over the failed audits of venture fund Burrill Life Sciences Capital Fund III.

How's Valeant doing?

You might not have been wondering that, but in case you were:

U.S. prosecutors are focusing on Valeant Pharmaceuticals International Inc.’s former CEO and CFO as they build a fraud case against the company that could yield charges within weeks, according to people familiar with the matter.

Authorities are looking into potential accounting fraud charges related to the company’s hidden ties to Philidor Rx Services LLC, a specialty pharmacy company that Valeant secretly controlled, the people said.

Eariler this year, I remarked on a few occasions that Valeant was probably the worst busy season client of 2016. If the timing of this investigation works out, a repeat is NOT out of the question.

CPA exam study games

Sure, why not:

Becker Professional Education has launched Accounting for Empires, their new interactive mobile game which acts as a supplementary study tool to their CPA Exam Review course.

Available on both Apple and Android app stores for smart phones and tablets, Empires utilizes multiple-choice questions and task-based simulations to see players "build" their empires while studying to pass the CPA Exam.

Has Donald Trump released his tax returns?

Nope! Although both the Washington Post and New York Times published big stories on Trump's charitable giving (or lack thereof) and brazen tax avoidance, respectively.

Both stories cap off months of reporting from each paper looking at two different aspects of DJT's personal tax situation. And what we've learned, I think, is that 1) Trump wants people to think he's a generous philanthropist when he most certainly is not and 2) He's more than willing to use the tax code to effect transactions that save himself and leave others holding the bag. 

Previously, on Going Concern…

Grant Thornton CEOs are the Cubs' good luck charm. In Open Items, someone's considering two opportunities: one with EY and another with an investment bank.

In other news:

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