KPMG and FIFA
You have to hand it to KPMG, dropping a highly visible global client isn't an easy move. FIFA's rampant corruption makes it easier, but the firm is far too close to all the action to come out clean so they probably figured it was best to cut their losses. Naturally, KPMG didn't comment on its resignation, however, FIFA was more than happy to discuss it:
“FIFA welcomes this change as it gives the organization the opportunity to work with a new audit firm, which will be appointed soon,” FIFA said. “In light of the serious allegations involving financial transactions outlined by the Swiss and U.S. authorities, it is essential for the financial function at FIFA to be externally reviewed and thoroughly reformed.”
What's interesting and comically typical for this situation is that KPMG spent the last 16 years as FIFA's auditor and then when everything went south, they investigated their own work:
KPMG Switzerland performed a recent forensic investigation for FIFA that led earlier this year to the organization banning [FIFA’s former secretary-general, Jérôme] Valcke from soccer-related activities—a probe that covered a period during which KPMG Switzerland had been auditing the organization’s books.
Experts say such doubling up on services is common, but some question KPMG Switzerland’s multiple engagements for FIFA.
“In a way, they’re auditing their own mistakes, and usually you don’t find you’ve made mistakes yourself,” Bino Catasús, a professor of accounting and auditing at Stockholm Business School, said of KPMG. “This is not good in appearance.”
You might think that FIFA would be too toxic of a client for anyone else to take on, but I think it's the contrary — at this stage, whatever else comes out, a new audit firm only has to worry about cleaning up the current mess. Blaming KPMG for any past failures won't be difficult.
Last month, we discussed an auditor independence quagmire that PwC has with one of its mutual-fund clients, Invesco. Late yesterday, a story from the Wall Street Journal took the matter further, reporting that there are several more asset managers who are facing the same situation:
PricewaterhouseCoopers LLP is in talks with regulators to resolve a dispute about whether the accounting giant is too close to some of its mutual-fund clients, highlighting an issue that could upend some relationships between auditors and money managers.
The disagreement with the Securities and Exchange Commission’s staff centers on a SEC requirement known as the Loan Rule, according to federal filings from fund companies including BlackRock Inc., Goldman Sachs Asset Management and Delaware Investments. Auditors, according to the rule, can’t serve clients that are at least 10% owned by a bank or any other large firm that lends the auditors money.
PwC has told dozens of funds it hasn’t violated the requirement, but it is unclear whether the SEC’s staff will decide that it has, according to the filings.
"[This] has certainly created some scrambling at fund firms trying to figure out what to do," says a lawyer for asset managers. The Journal story reports that this could put $300 million in audit fees in play, citing data from Barrington Partners. And here's a little more on the Loan Rule that's tripping them up:
Debate over the SEC’s Loan Rule has intensified with the proliferation of so-called omnibus accounts that broker affiliates of banks use to pool together customer transactions. These accounts can nominally give a lender a big stake in a mutual fund even though the shares actually are owned by many individual investors. The fund industry says those accounts are tripping the rule’s threshold even when there isn’t really a conflict.
PwC has told clients one or more of its lenders own stakes of 10% or more in mutual funds audited by PwC, but that this ownership doesn’t compromise its objectivity or impartiality, according to fund companies’ filings. But the firm also has informed the companies that the SEC may disagree: Under the SEC’s interpretation, some such situations involving PwC may violate the rule, “calling into question PwC’s independence,” according to filings from BlackRock, Delaware and Invesco Inc.
If the Commission was looking at this in a form over substance kind of way, I'd say that these asset managers should start calling potential replacements auditors. But the fact that only "some such situations" may violate the rule makes me think the SEC won't be sticklers about it. Fund lawyers say that "it could resolve the matter by issuing new guidance for such relationships going forward." But if the SEC goes the other way…that will be ugly.
Americans hate taxes
Area man does something obnoxious:
McHenry resident Dan R. Aylward, frustrated over his increasing property tax bill, visited the county treasurer’s office and paid the first installment in dollar bills – all $5,734.18 of it.
The 67-year-old arrived Monday morning at the McHenry County Treasurer’s Office, located at 2100 N. Seminary Ave., with a large black suitcase in tow. Standing outside, among a crowd of roughly 20 supporters and county officials with stacks of $1 bills spilling out of his suitcase, Aylward said he plans to do this again when the other half of his property tax bill is due in a few months – giving the county a total of $11,468.36 in $1 bills.
“I will do this every year until my last breath,” he said. “[Raising property taxes] is wrong, it’s evil, and it’s gotta stop.”
I've never understood the purpose of protesting taxes by paying in small denominations. You're paying! Treasurer's offices have cash counting machines precisely for jerk stores like this guy. If taxes are evil, then refuse to pay them on moral grounds. Yes, that could result in jail time, but anyone not willing to go to prison for their cause isn't trying hard enough. I hope they raise his taxes again.
Previously, on Going Concern…
In other news:
Former Ithaca accountant admits to $10M investment fraud
COSO to Unveil New Enterprise Risk Management Framework
Blockchain Is Not Going To Change The World
Facebook accidentally declares state of war in the Philippines
Man named Peace accused of assault with big stick
Get the Accounting News Roundup in your inbox every weekday by signing up here.