Accounting News Roundup: The PwC Partner at MF Global; Schumer Pulling for PCAOB; RSM and Crowe Merge in China | 06.07.13

Profits Thrive in Weak Recovery [WSJ]
Two years after the official end of the recession, a range of indicators show that the economic recovery has been the worst, or one of the worst, since the government began tracking such data after World War II: Unemployment is too high, bank lending necessary to spur spending is too low, home prices are depressed while household expectations for financial well-being are near record low levels. Many economists predict the sluggish rebound may continue for years.

How Zynga Recognizes Revenue [Dow Jones]
Washington Mutual Inc. (WAMUQ) and other co-defendants agreed to settle a consolidated shareholder class-action lawsuit for $208.5 million, putting behind it one chunk of the failed bank’s litigation issues. The suit in federal court in Seattle was the consolidated version of several other class-action lawsuits filed by shareholders, in multiple courts, that all essentially alleged that Washington Mutual failed to stop them from investing when the now-failed thrift knew, or should have known, how much trouble it was in. Some of the lawsuits were actually filed long before the thrift’s collapse, though the plaintiffs regularly updated the consolidated case to include the latest reports on Washington Mutual.

2 Republicans Open Door to Increases in Revenue [NYT]
One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes. “I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery,” Mr. Cornyn said on “Fox News Sunday.” “Now, do we believe tax reform is necessary? I would say absolutely.”

Budget Needs Let Fireworks Fly Lawfully [NYT]
Desperate to find any source of untapped revenue, many cities, counties and states are scrapping decades-old restrictions on firework sales, trying to rescue budgets battered by several years of economic doldrums. A 65-year-old ban on fireworks in Hawkins County, Tenn., was lifted in May after a county commissioner persuaded colleagues that the sales could generate as much as $200,000 in annual permit fees and sales tax revenue. “Every penny helps,” said Shane Bailey, the county commissioner.

Minnesota Lawmakers, Governor to Discuss Ending Shutdown After Holiday [Bloomberg]
Minnesota Republican legislative leaders are returning to the capital in St. Paul today after a long holiday weekend ready to resume talks with Democratic Governor Mark Dayton on ending a government shutdown, said Senator Geoff Michel, the deputy majority leader. “It was probably healthy for the legislature and the governor to get out of St. Paul and get a little perspective,” Michel said in a telephone interview yesterday from Edina.

Unpaid taxes total $400B, but little political will to pursue it [Seattle Times]
In its most recent analysis, from 2001, the Internal Revenue Service estimated about 84 percent of federal taxes were voluntarily paid on time that year, leaving a gross tax gap of $345 billion, or roughly 16 percent, uncollected. Late payments and IRS collection efforts cut the net tax gap to $290 billion in 2001. But similar estimates point to a gross tax gap of $410 billion to $500 billion in 2010, said Benjamin Harris, a research economist at the center-left Brookings Institution. “You could go a long way toward solving our budget mess by closing the tax gap, but the problem is, it’s not easily closed,” Harris said.

Dominique Strauss-Kahn Accuser Said to Have Lied on Tax Return [AT]
Prosecutors found a number of inconsistencies in the accuser’s story about the incident as well as her finances, according to The New York Times. They found that she had lied on her application for asylum from Guinea about a gang rape, and misrepresented her income in order to qualify for public housing. She also claimed a friend’s child as her own on her tax return as a dependent, in addition to her own daughter.

China listings in U.S. could slow on accounting scandals -PwC partner [Reuters]
The negative sentiment towards some North America-listed Chinese companies triggered by recent accounting scandals will probably slow the momentum of Chinese firms’ IPOs in the United States, a partner at accounting firm PricewaterhouseCoopers China operations said on Monday. “The current negative public opinion on Chinese companies in overseas markets, especially in the United States, will definitely affect Chinese companies seeking a listing in those markets,” Jean Sun, assurance partner with PwC in Beijing, told reporters. “Investors are now less willing to dip into their pockets (for Chinese companies), so it’s understandable that the listing momentum will slow,” said Sun.

Obama Warns of Default Risk [WSJ]
With Congress deadlocked a week before the government runs out of cash to pay its bills, President Barack Obama warned Monday in his starkest terms yet that the U.S. is on the brink of a default that could trigger an economic upheaval. Mr. Obama made his comments in a prime-time national address followed immediately by a response from House Speaker John Boehner (R., Ohio), who dismissed not only the president’s approach, but virtually his entire record in office. Both men spoke just hours after the top Republican and Democratic leaders in Congress unveiled competing debt plans. Thely faced opposition that could make it hard to pass their respective chambers.

More U.S. lawsuits target Chinese reverse mergers [Reuters]
Accounting debacles at U.S.-listed Chinese companies have prompted a surge of securities fraud lawsuits, but investors might have trouble recouping their losses even if they win. More than one-fourth of the 94 U.S. securities fraud lawsuits seeking class-action status and filed from January to June related to so-called Chinese reverse mergers, according to a study released on Tuesday by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research in Boston.

News Corp. Board Challenged [WSJ]
The Journal [!] reports that the audit committee is even less independent than we thought.

IRS Change Helps ‘Innocent Spouse’ [WSJ]
The Internal Revenue Service is giving some relief to “innocent spouses” who otherwise may have been liable for a partner’s tax debt. Effective immediately, the agency has eliminated a rule that disqualifies taxpayers from innocent-spouse status if they fail to file for relief within two years—a provision that snagged people who otherwise qualified, including abused women.

UK company auditors told to stand up to banks [Reuters]
“We find too many audits that require significant improvement. Scepticism is a key factor in those audits that do need an improvement,” said Paul George, director of auditing at the Professional Oversight Board (POB). The POB’s annual survey of audits found that the UK operations of the “Big Four” — KPMG, PwC, Deloitte and Ernst & Young — along with two smaller firms Grant Thornton and BDO, all failed to be sceptical enough. PwC was told to pay more attention to how impairment of goodwill is calculated, while Ernst & Young should make sure there is enough evidence to back growth rates. Grant Thornton, KPMG, BDO and Deloitte were told to apply appropriate challenges to company bosses.

Bad Food? Tax It, and Subsidize Vegetables [NYT]
Simply put: taxes would reduce consumption of unhealthful foods and generate billions of dollars annually. That money could be used to subsidize the purchase of staple foods like seasonal greens, vegetables, whole grains, dried legumes and fruit.

Men use ‘sniff test’ to tell clothes’ cleanliness, survey shows [MSNBC]
For some reason, this required a survey.

Auditors’ Somewhat Raised Confidence [CFO]
First the good news: fewer companies are carrying around the burden of a going-concern qualification. […] Now the bad news: the numbers are still high. And the drop in qualifications has more to do with companies dropping out of the public-company sector, getting acquired, or — confirming their auditors’ predictions — going bankrupt.