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Accounting News Roundup: Big 4 Audits and Disclosure Quality; Substance, Schmubstance; Spot the Liar | 01.18.13

Posted on by Caleb Newquist

Using Big Four improves disclosure quality [Accountancy Age] 
Companies that have a Big Four auditor are likely to provide better quality disclosures in financial statements prepared under IFRS, independent research has found. Research from Cass Business School also found that high-quality financial reporting practices are more likely to be observed by companies operating in countries with stronger regulatory regimes. According to the study, there is "considerable variation" across European countries in compliance with some impairment disclosure requirements, suggesting uneven application of IFRS.

The Death and Transfiguration of "Substance Over Form" in U.S. GAAP [Accounting Onion]
Tom Selling: "IFRS adoption in any form would be an unmitigated disaster, with the ridiculous notion of 'substance over form' playing a leading role. It's a concept that should have no place in U.S. GAAP, and convergence is to blame for bringing it back."

Reality not politics dictates cash hoarding [FT]
“Concern over mounting corporate cash seems mistaken,” […] “While businesses have increased the share of assets they hold as cash … they have simultaneously decreased their share of current assets held in non income-earning forms.”

Accounting firm BKD is looking to tap into growth opportunities [SABJ]
Since its merger with locally based The Hanke Group PC in 2008, BKD LLP has worked to expand its service offerings to the San Antonio business community with a renewed focus on financial services. And in recent years, the firm is finding new opportunities in the oil and gas sector as businesses grow and expand around the Eagle Ford Shale in South Texas.

I am an experienced tax accountant. AMA. Or don't, and pay Uncle Sam. [Reddit]
For the auditors out there.

The Lance Armstrong Lie Cloud [ZH]
For the burgeoning fraud detectors out there.

TIGTA: Prisoner Tax Fraud Claims Continue to Skyrocket [TaxProf]
There were over 91,000 fraudulent tax returns filed by prisoners in 2010.

Pros And Cons Of A Career In Porn [HP]
You can't say you haven't thought about it. We've basically covered it before.

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Grant Thornton Named in New Writ, Partner Still MIA

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGToday in non-Patrick Byrne Grant Thornton news, the Hong Kong and International firms are now named in a new writ related to the scandal involving nowhere-to-be-found-former-partner Gabriel Azedo.

We imagine GT is less than thrilled with this latest development since they probably felt pretty good about firing Gabe’s ass the moment they found out he was a liability. The new writ states that the firms are ‘vicariously liable’ for $10.3 million.

There’s no indication that Eddie Nusbaum & Co. have put out an APB on Gabe in order to track him down and get all Jack Bauer on his ass. If it were us, we’d have every SD scouring the Earth* for this guy.

Until that happens, Grant Thornton is in deny ’til you die mode, saying that it will be ‘defended vigorously’ and that they expect to be ‘fully exonerated.’ God, will someone come up with a new press release for these scandals?

Grant Thornton linked to fraud claims [FT]

*You’re a Global Six Firm after all

When CEOs and Audit Committee Members Are BFFs, Financial Statements Are Ps of S

Welcome to the latest edition of Accumulated Deprecation, Greg Kyte's monthly column. Go here to […]

KPMG UK Head of Audit Explains Rentokil Arrangement

KPMG_chair.jpgKPMG’s new arrangement with Rentokil has brought some differing opinions amongst the firms, even prompting PwC to take a not-so direct jab at the Radio Station for scooping Rentokil.
Today, KPMG’s head of audit in the UK, Oliver Tant, wrote a piece for Accountancy Age explaining the firm’s new “extended assurance”:
Continued, after the jump

Under the service, those responsible for corporate governance may ask KPMG to perform work beyond that which is required for the statutory audit, for example by testing a larger sample of controls or additional transactions and balances of lower value than the materiality level set for the statutory audit.
This work does not replace, conflict with or undermine the independence of the external audit it simply extends our understanding of the business and its controls and hence the breadth and depth of insight we can offer. That is why we call it extended assurance.

Mr. Tant also cites the savings passed along to the client, which is so hot these days. He also explains what “extended assurance” is NOT:

The service is not about merging the external and internal audit functions. A company can continue to have its own internal audit function and those charged with corporate governance will still be responsible for assessing the overall adequacy of a company’s control environment and the need for skilled internal audit expertise.
Ethical standards do not prevent the auditor from doing more than the bare minimum to support the audit opinion. We will identify and plan the work necessary to support our audit opinion independent of any further work we may be requested to perform.

As we mentioned, PwC has already made their opinion known and E&Y’s head of assurance in the UK, John Flattery has stated that they will not be “mirroring the arrangement.”
It’s already been speculated that this type of arrangement would not be allowed in the U.S. but there has been no indication that the U.S. firm is pursuing such arrangements.
Since independence is kinda, sorta important for auditors, and many of you are ramming these rules into your brains as we speak (or just waiting to see if you learned anything) discuss in the comments how you feel about the arrangement. Would it pass the smell test Stateside? Is KPMG evolving to the market or are they on thin ice? Are P. Dubs and Ernie being self-righteous dicks since they didn’t think of it first? Feel free to get ugly about it.
KPMG audit head defends controversial Rentokil role [Accountancy Age]