Accounting News Roundup: Muddy Waters’ Newest Report; Federal Revenue Breakdown; The Worst ‘Cut and Paste’ Job; | 10.25.13

PCAOB Warns on Internal-Control Problems [CFOJ]
The PCAOB found in a review of its latest year of inspection reports that audit firms failed to get enough evidence to support their conclusions about the effectiveness of internal controls in 15% of 309 audits inspected for its 2012 inspection reports. “Auditors should take note of the matters discussed in this alert in planning and performing their audits, given the importance of the controls companies use to produce their financial statements,” PCAOB Chairman James Doty said in a statement.

After Muddy Waters Report, NQ Mobile Falls by Half [DealBook]
In its research note, Muddy Waters argued that “at least 72 percent of NQ’s purported 2012 China security revenue is fictitious,” saying the company was a “zero.” “NQ’s largest customer by far is really NQ,” Muddy Waters, which is run by Carson C. Block, said. The note added that the company’s “future is as bleak as its past,” and that its “acquisitions are highly likely to be corrupt.”

JPMorgan Said to See Possible U.S. Accord on Madoff Scheme Role [BBW]
JPMorgan Chase & Co. (JPM:US), under siege on multiple fronts by state and federal prosecutors investigating alleged wrongdoing at the largest U.S. bank, is in talks with federal prosecutors in New York to resolve allegations it helped facilitate Bernard Madoff’s crimes. The probe by Manhattan U.S. Attorney Preet Bharara is tied to how the bank handled the funds of the convicted money manager and whether it turned a blind eye to his multibillion-dollar fraud, the biggest Ponzi scheme in U.S. history. The case may end in a deferred prosecution agreement, a person familiar with the matter said. Under such an agreement, the government agrees not to pursue prosecution for a period of time and dismiss the charges if the entity or individual improves its programs or complies with the law. It is one of the options U.S. authorities have discussed with the bank, including resolving the matter with just a fine, said the person, who asked not to be identified because the talks are private.

Income Taxes Account for the Largest Share of Federal Revenue [TF]
Today, payroll taxes are still the second largest share of tax revenues while excise taxes would hardly fund two weeks’ worth of federal spending. Collections from individual income taxes are now the number one source of revenues for Uncle Sam. Corporate income taxes have declined as a source of revenues since the 1950s for many reasons—including the fact that more business income is now taxed on individual tax returns than on corporate returns.

Ex-Madoff Employee Tells Jury of ‘Cut And Paste’ Trades [Bloomberg]
Annette Bongiorno, who worked for Madoff for 40 years and helped run the investment-advisory business at the heart of the Ponzi scheme, would request trade dates and prices as much as a year old be used on account statements to reach pre-determined profit goals for customers, and cut out and tape typed trades onto their statements, Winnie Jackson, the defendant’s former assistant, testified yesterday in federal court in Manhattan. Bongiorno gave “very little explanation” when asked how the company’s trading strategy worked, and Jackson didn’t realize anything she was doing was fraudulent while she was following orders, she said.

Twitter Sets I.P.O. Price at $17 to $20 a Share [DealBook]
Twitter took the first steps in the pricing of its eagerly awaited initial public offering on Thursday, setting a price range for its shares that was below what some analysts had expected. The social media darling disclosed that it planned to sell 70 million shares at $17 to $20 each. At the midpoint of that range, the offering would raise about $1.3 billion and would value Twitter at about $10 billion, excluding options. Including options and restricted stock units, the company would be valued at more than $12 billion.

Texas Mom Ripped Off Son's Scrotum and Then Superglued It Back On [Gawker]
According to the criminal complaint affidavit, Jennifer Marie Vargas's husband returned home on September 27th to find bloody paper towels stuffed down his crying son's underwear. Upon closer inspection, it was revealed that the child's scrotum had been partially severed, resulting in a 4 centimeter-long tear and significant bruising. He was rushed to the hospital where surgeons were able to repair the damage. The affidavit says Vargas, 34, admitted to inflicting the injury out of anger with the child. She told agents she attempted to treat the wound with alcohol, and then "applied superglue to the (boy's) scrotum until the bleeding stopped." After lining his underwear with paper towels, Vargas "then told him to go to bed."

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