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November 28, 2022

Accounting News Roundup: Non-GAAP Magic and Losing Your CPA | 05.11.16

Non-GAAP worries

One of the things people find troubling about non-GAAP reporting is how it can magically transform losses into gains. This MarketWatch article has a list of 26 companies from the S&P 500 that did precisely that over the last year. They include names like AIG, Halliburton, News Corp. and Yahoo. However, this guy doesn't seem to mind:

“Executives believe their management-accounting information is more representative of their businesses going forward than the GAAP numbers,” Kenneth Daly, CEO of the National Association of Corporate Directors, said in an interview. “For new-economy companies, what people are interested in has nothing to do with accounting data. An example for Twitter is monthly users, a non-accounting measure, for sure.”

And sure, operating measures are useful, but it seems kinda uh, wrong, to suggest that people aren't interested in accounting data. In the case of Twitter, it had a Q1 loss of $79.7 million. After excluding $150.9 million in stock compensation and other adjustments, it had a profit of $102.7 million. That isn't totally irrelevant.

Accountants behaving badly

Tim Fitzgerald, a CFO for a holding company called KC United, was instructed to manipulate financial statements in order to "maintain its banking and bonding relationships." One of those banks was Bank at Blue Valley, who required KC to submit reviewed financial statements regularly. You can probably guess where it goes from here:

Fitzgerald knew that if KC United had an outside accounting firm review the financial statements, they would easily discover the alterations. So Fitzgerald prepared an annual financial statement reflecting the falsified information along with a fraudulent cover letter — on the letterhead of the outside accounting firm — stating that the financial information was reviewed and approved.

The financial statement was sent in 2009 to the bank, which used the information to consolidate and renew several outstanding loans worth about $1.1 million.

A couple years later, three of KC's subsidiaries went bankrupt. Bank at Blue Valley lost about $900k. Fitzgerald pleaded guilty to bank fraud last year and this year the Kansas Board of Accountancy stripped him of his CPA. Sad trombone all around.

Elsewhere in bad accountant behavior, "I had a payroll service so I collected tax money. […] I was taking my clients' money and putting it into a personal account." Sigh. Don't do that.

Dress codes

Well, I'm sure PwC's UK firm will revisit its arrangement with this temp agency that sent a woman home for not wearing high heels:

Nicola Thorp, an actress who signed up with a temping agency, was told she could not work as a receptionist at PricewaterhouseCoopers without donning 'more feminine' attire.

When she protested, agency bosses told her it was the 'female grooming policy' that all women should wear heels measuring at least 2in.

Now Miss Thorp, 27, has set up a petition calling for the dress code to be banned, while accountancy giant PwC has insisted that its staff are free to wear what they want.

She also claims that the agency said, "that the client prefers it if you wear a skirt" and suggested "[she] wear make-up that fitted on to a colour chart of 'acceptable shades.'"

Every UK outlet has this story now and PwC is reiterating that none of this is their policy and that "staff are not expected to wear heels" and "it's down to the individual for what they want to wear." Maybe the first order of business in the BoMo administration should be a global jeans policy.

Previously, on Going Concern…

I wrote about the future audit team. And in Open Items, Will below average pay hurt my job search?

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