Author: Adrienne Gonzalez

Adrienne is a 15-year veteran of the accounting industry, if by "veteran" you mean "vulture prowling the periphery of the profession waiting for something exciting to happen." She has been spewing vitriol on Going Concern since the site was founded in 2009. A former CPA review employee, she has sat through more FAR classes than any CPA exam candidate ever could -- even one who has failed FAR seven times -- and can still recall most of the mnemonics all these years later.

The City of Toronto Pays KPMG $350,000 to Do a Study on the Obvious

To the Klynveldians, it was a pretty decent pay day just to state the obvious: that the city of Toronto could save a few bucks (make that a few loonies) by not putting fluoride in its water supply and a few other cost-saving measures. We find KPMG’s tagline of “cutting through complexity” to be extra appropriately hilarious in this particular context and there is no mention in the report of potential cost savings that could be realized were Toronto never to pay for Big 4 consulting services ever again.

Krupo has the entire story over at A Counting School but here’s the short version for those of you with legitimate ADHD problems: eliminating or reducing some non-core services provided by the Public Works and Infrastructure department could save the city $10 – 15 million (CAD).

KPMG states that ending the forced medication of Toronto’s public water supply by cutting the fluoride could have detrimental effects on the dental well-being of Torontonians, though obviously they haven’t been reading up on their tin foil hat, anti-fluoride research, which clearly shows a higher incidence of tooth decay in areas which use the fertilizer-production byproduct (which is considered toxic waste as long as it isn’t dumped in the water supply). Cut it! (If you think I’m insane, check out this “chemical spill” that burned through the concrete in Illinois. Those guys in Hazmat suits? Cleaning up Hydrofluorosilicic acid, the toxic industry slurry that becomes fluoride)

Anyway, back to the subject at hand. KPMG also advises Toronto that holding itself to a lower level standard could help save some cash. “Over half of the services that report through the Public Works Committee are provided ‘at standard’, which is generally the level required by provincial legislation or the level generally provided by other municipalities,” says the report. “30% of services are provided at slightly above standard offering some opportunities for cost reduction by lowering the service level provided. 17% of services are delivered slightly below or below standard.”

One such “higher standard” service to which KPMG refers in this report is the Toxic Taxi (no, that’s not what you call a bar crawl through Denver with Caleb after yoga and two red bean burritos), a free service that picks up your hazardous household waste like expired medications and batteries if you cannot drop them off at an authorized location yourself. We wonder how much went in to make the high quality “advertisement” of bootleg Canadian Mexicans Chuck and Vince trying to get you to turn in your used paint and batteries.

As Torontoist so astutely pointed out, the report didn’t actually look at how the horribly mismanaged Toronto city government could run more efficiently but instead simply analyzed which services could be cut. “KPMG did not assess the effectiveness or efficiency of City services,” the report states. “Assessment of how services are delivered is envisioned to be conducted through separate efficiency reviews. KPMG did not conduct financial analyses of programs and services to identify potential savings.”

I guess efficiency suggestions are extra.

Comp Watch ’11: Ernst & Young Comp Discussions Start Today

We’ve received several short, anxious emails (presumably all from Uncle Ernie’s nervous camp) tipping us off to the fact that E&Y comp discussions are going down this week, so it must be true. Of course, this post is useless without actual comp numbers, which we’re sure you’ll give us as soon as you have your sit-downs.

Hi Going Concern –

To give you heads up, E&Y comp and promotions dicussions [sic] are happening this week (they’re happening today in my office). Perhaps it’s a good time to open the new thread on the topic.

Cheers,
E&Yer

Great, so does this mean the Ohio and Michigan crews have already packed up and are ready to bail if they get anything less than whatever it was they are holding out for?

Rumors so far are that raises will be in line with last year’s, which were not at all disappointing considering that we are still (not technically) in a recession, not to mention all that Lehman drama the E&Y lawyers are still hashing out. Too soon? Anyway, as usual, you’re welcome to entertain each other with disparaging comments about the size of your, er, comp packages until we hear news on actual numbers.

Update: Looks like some pretty good numbers are rolling in but please, for the sake of your fellow EY brethren, if you want to share your comp info, be sure to at a minimum include where you are (general metro or region is fine), what service line you are in, your rating (hint: this is a number) and, of course, the actual new pay and bonus number (if any).

North Carolina Accountant Convicted of Felony Assault and Kidnapping

32-year-old Timothy David Rickman – accused of breaking into the home of ex-girlfriend Michelle Deak in January 2009, stabbing her in the head, burning her arm with a cigarette lighter and choking her, as well as hitting her 8-year-old daughter – has accepted a plea bargain in his bizarre case. Rickman will serve 60 days in jail, with 120 days of electronic monitoring after and 5 years of probation.

If Rickman violates his probation, he could serve at least four years in prison and up to six and a half years.

Rickman’s lawyer Bernard Condlin insists that accepting the plea does not translate into an admission of guilt for his client but states that Rickman takes responsibility for the charges and their consequences (er, isn’t that an admission of guilt?).

We were unable to find a record of Rickman in the North Carolina Board of Accountancy’s database, so it can be assumed he just wasn’t cut out to be a CPA. I guess that means the integrity of the profession isn’t at all dented by this little aggro freak show’s actions?

Deloitte Goes Partner Crazy

Fresh from the mailbag… well, not fresh, actually, it’s kind of been sitting in there gathering dust all weekend so it’s kind of the moldy gym sock of mail. But I digress.

Prior year they [Deloitte] promoted 101 partners and 136 directors; for this year (actual firm year starts June 1, but partners get promoted in September) there will be 146 partners and 180 directors.
This is for the United States only…

Great news for the new partners and directors, not so great for those of you who are still staring at the Green Dot’s multiplier slides wondering when that 8x bump is going to kick in.

Feel free to commence to discussing how big your yacht will be when you make partner in the comments.

(VIDEO) FEI’s Edith Orenstein and the Singing CPA Present a Love Song to the Pozen Committee

FEI’s Edith Orenstein has dropped a track on YouTube with “The Singing CPA” Steven Zelin called “Hey There Bob Pozen” (as of the date this is posted, we haven’t been able to find a Doctor P remix of the hot track) that really doesn’t need commentary at this moment. But we’ll be back after the jump with a few things to say.

Oh, I didn’t mention it’s to the tune of “Hey There Delilah” did I? Yeah. It totally is.

Anyway, it’s a tribute to the Pozen committee, of which Edith is a huge fan, in honor of its 3rd birthday:

I am a big fan of the Pozen committee, mainly because, like other committees that have fascinated me (such as the EITF , the PCAOB SAG, and the U.S. Treasury Advisory Committee on the Auditing Profession) it has a fascinating cross-section of preparers (issuers), auditors, investors, and others. I loved watching the webcasts where you could see folks discuss things from different vantage points at the same time. I think that kind of broad-based committee has an advantage over committees made up of only one segment of the constituent community, such as preparers, auditors, or investors. I think the standard-setters and rulemakers can receive the most efficient and effective input when the various segments of constituents face off against one another (I mean that in a polite way, I should say, ‘dialogue’ with each other) on issues of mutual interest.

I assume here approximately 6 to 7 percent of you have any clue what the Pozen committee is (unless you regularly read Edith, which you should if you’re into serious financial reporting shit of which we rarely if ever cover), here’s some financial reporting porn (PDF) to groove on. The short version is that the August 2008 report recommends steps to improve the usefulness of financial information to investors.

In case you’ve forgotten, this isn’t Edith’s first venture into the world of YouTube. Surely you remember “If I Were an Auditor,” filmed completely in Second Life with the help of the MACPA and friends.

Could you imagine what would happen if we could get the Maryland Association of CPAs’ dancing flash mob to do a mashup with Edith and Steven? Someone please get on that.

Accounting News Roundup: Much Ado About the Debt Ceiling; The Amazon Tax Problem Heats Up in California; Accounting Professors Storm Denver | 08.01.11

Gone Fishing [Going Concern]
After two years of being chained to my desk and staring at my laptop, I’m taking a few days off (seven to be precise) starting Monday. I know, I know. Unacceptable. But after some arm twisting, TPTB figure that some vacation would give me a chance to relax and it offers them some reprieve from my kvetching about EVERYTHING. Plus when the country defaults on Tuesday I thought it might be safer to be in a Paris bistro while the rest of you fight over scraps in the streets.

Debt-Limit Deal to Get Congress Vote Today [SF Chronicle]
Many Californians ignore the “use tax” – the equivalent of sales tax but remitted by state residents for products bought from out-of-state retailers that did not collect sales tax. The state estimates that $1.1 billion in use tax goes uncollected every year. Cash-strapped California is eager to corral that big chunk of change, most notably through the “Amazon tax” bill that took effect in late June. The new law requires Amazon and other online sellers to collect sales tax, but is being fiercely fought by the e-commerce giant and its brethren.

HSBC to Cut 30,000 Jobs [DealBook]
HSBC, the biggest European bank, said on Monday that it was cutting 30,000 jobs as part of a wide-ranging cost cutting program to improve profitability. The job cuts, which would represent about 10 percent of HSBC’s work force, are part of a strategy to reduce expenses by $2.5 billion to $3.5 billion over the next two years.

Debt Ceiling, Spending Cuts to Rise But No Word on Higher Taxes [taxgirl via Forbes]
The agreement also allows for President Obama to raise the debt ceiling immediately up to $400 billion, heading off the “certain” Armageddon that pundits have been warning about (insert a lot of coughing here). An additional $500 billion in debt ceiling headroom has also been authorized although, as part of the deal, Congress specifically reserves the right to vote against that at a later date so that they can dutifully wag their fingers at the President. And the President has reserved the right to veto that vote so that he can wag a finger at Congress (you can pick the finger). Future increases have also been authorized, with limitations.

2011 AAA Annual Meeting [The Summa]
More than 3,000 accounting professors will be packing up this week, and heading for Denver. The American Accounting Association (AAA), the professional association for accounting professors, is holding its annual meeting, August 6-10.

XBRL: What’s It Good For? [CFO]
On July 12, XBRL US, a nonprofit consortium for XBRL (extensible business reporting language) standards, announced a contest with a $20,000 grand prize to be awarded to whoever submits the “most inventive and useful application leveraging XBRL-formatted data from the U.S. Securities and Exchange Commission (SEC) EDGAR database” for business benefit.

Companies Altering Compensation Plans Over Say-on-Pay [Compliance Week]
Many companies are making changes to their compensation plans, especially those that garnered lukewarm support or lower from shareholders and those that saw proxy advisory firms recommend that shareholders vote against their plans.

Accountants Moving From Hourly Rates To Fixed Fees [PR]
Over half of local accounting practitioners surveyed cite fixed fees as their primary means of pricing services, more than double hourly rate pricing.

LA Judge Rules Crash Producer Engaged in Creative Accounting

I don’t watch movies but coincidentally, I saw Crash and frankly it’s a miracle it made any money at all (not to mention three Academy Awards, but what do I know about movies?). That being said, L.A. Superior Court Judge Daniel Buckley has determined producer Bob Yari engaged in creative accounting, ruling that Yari did so as part of an intentional scheme to withhold money from director Paul Haggis, star Brendan Fraser and co-writer Bobby Moresco.

The plaintiffs’ suit alleged that Yari improperly withheld money owed to them for the 2005 film and while Buckley has ruled in their favor, the judge has not yet set a monetary reward for plaintiffs.

The judge was clear in his ruling (which can be read in its entirety at the Hollywood Reporter), calling out the defendants’ inability to correct blatant accounting mishaps and outright fraudulent practices:

Defendants breached the contracts with the plaintiffs by diverting funds to third parties; adopting bogus contractual interpretations; refusing to correct accounting errors in a timely manner; adopting inappropriate accounting procedures that were contrary to industry standards; and, ultimately, using all of these to avoid paying plaintiffs money due under contracts.

This isn’t the first trip to court for Yari, who was sued for $100,000 by Matt Dillon, who played a dickhead cop in the film. Dillon’s company, Matthias Productions, performed an audit in 2006 and found that executives “deliberately authorized [the production entity] to apply an incorrect formula for the calculation of [Dillon’s] contingent compensation” and therefore owed him a larger piece of the $98 million the film grossed worldwide.

Paul Haggis, Brendan Fraser Win ‘Crash’ Lawsuit Against Producer Bob Yari [THR]

Apparently Accountants are the Most Valued Professional Advisers (According to the Brits)

Keep in mind before we get into this that the Brits are a tad wonky; they use funny words (“fag,” for example, is a cigarette, not a name that’ll get you a beatdown in San Francisco’s Castro District), drive on the wrong side of the road and live in tiny little crackerbox houses. That said, small businesses over there feel their accountants have served their money best.

Well, kind of.

Professional advice website, unbiased.co.uk has today released new research which reveals accountants as the most valued professional adviser when it comes to financial advice. Of the small businesses surveyed, 21% believed that their accountant provides them with the most valuable business advice. 12% of small business owners name friends, while 10% state a member of their family has given them the best advice on their business. One in three (31%) believe their own advice is the most valuable with regards to running their company.

Of the 54% of small business owners who have sought professional advice on their accounting and book keeping needs, 48% say that their accountant has saved them money in the long-term, while 47% state that they had helped them make sense of the complex UK tax system. Over a quarter (28%) say using an accountant has meant they have more time to focus on important business decisions. One in ten (10%) say their accountant has helped them to free up time to spend with their family.

That’s very warm and cozy, isn’t it? Except that 18% more of them prefer “focusing on important business decisions” to hanging out with their family with the time an accountant saves them.

Granted, the company from which the press release comes is “sponsored” by companies like J.P. Morgan Asset Management (others include AEGON, Legal & General, Alliance Trust, Lockton, Aviva, MetLife, AXA Life, Opinium Research, Bright Grey, Prudential, Canada Life Ltd, Royal London 360°, Clerical Medical Investment, Schroders… so how unbiased can it really be?)

NASBA and AICPA Launch New Site to Take the Guesswork Out of Mobility

Practice mobility has always been a big issue for CPAs, more so in these turbulent times when qualified individuals have to pack up and go a la Tom Joad just to find paying work in a reasonable market sometimes. So it makes sense that the AICPA and NASBA have jointly released a new online tool to help CPAs do what they do best from state to state.

Until all 55 jurisdictions can truly band together and agree on a uniform requirement across the board for all CPAs (never going to happen), this is the next best option.

Here’s the scoop:

The National Association of State Boards of Accountancy and the American Institute of Certified Public Accountants today announced the launch of CPAmobility.org – an online tool designed to help Certified Public Accountants navigate the new practice privilege requirements that allow CPAs to more easily practice across state borders.

A joint project of the AICPA and NASBA, the new CPAmobility.org website provides helpful information, updated regularly, on state practice privilege requirements for CPAs, commonly referred to as “mobility” laws, for all 50 states and 5 U.S jurisdictions. In four simple clicks online, CPAs can learn whether their existing home state registration is mobile and allows them to work in other jurisdictions without additional notice, or whether further paperwork is required. In most cases, additional registration is no longer required because mobility statutes recognizing CPA licenses granted by other states and jurisdictions have been enacted in 47 of the 55 U.S. jurisdictions.

“CPAmobility.org is a valuable service that allows CPAs to take advantage of the benefits associated with state mobility laws with confidence. We are happy to offer a free tool that will assist CPAs in determining whether or not they can exercise mobility in a particular jurisdiction at the click of a button, on their laptop or mobile device,” said Ken L. Bishop, executive vice president and COO of NASBA.

“Mobility has become a reality for CPAs and accounting firms from coast-to-coast and it is now time to open the system for business,” said Barry Melancon, president and CEO of the AICPA. “We are very pleased to be able to offer this free service to CPA firms together with NASBA, which was a key partner in developing the technology and information to power the website, CPAmobility.org.”

The site works by posing three targeted questions to CPAs interested in exercising cross-border practice privileges. Those are:
Where is your principal place of business?
Where are you going to perform services (target state)?
What type of services will you perform?

Information on licensing and registration requirements is then produced allowing CPAs to move quickly to address new business opportunities. CPAmobility.org offers immediate access to the site through a mobile application, an attractive benefit for CPAs needing to confirm eligibility requirements while they are on the road or away from their offices.

NASBA and the AICPA have been longtime advocates of mobility, providing support and resources to state boards and state CPA societies seeking changes to current rules. As additional states continue to embrace mobility, the need to educate CPAs on the requirements is growing.

CPAmobility.org will feature useful links to NASBA and AICPA resources. To learn more about mobility or to research cross-border practice privilege requirements, visit www.CPAmobility.org.

At first glance, the new site features a slick interface (if you ignore the obnoxious Helvetica header) that asks you three simple questions: where do you practice normally, where do you plan to practice and what type of services will you perform? Once you answer those, it will tell you the rules for individuals and firms based on your responses.

Awesome!

What’s the Deal with Groupon’s Adjusted CSOI?

According to Bloomberg, Groupon’s operating income and other accounting trickery habits are being studied by the U.S. Securities and Exchange Commission, part of a routine review of the site’s IPO. Nothing out of the ordinary there.

But Groupon seems pretty transparent about the unreliability of their methodology. I guess this is to say “don’t rely on this information, we’re kind of making some of these numbers up” so investors can’t say they weren’t warned.

Check out this June 2, 2011 SEC filing:

Our use of Adjusted CSOI has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted CSOI does not reflect the significant cash investments that we currently are making to acquire new subscribers;

• Adjusted CSOI does not reflect the potentially dilutive impact of issuing equity-based compensation to our management team and employees or in connection with acquisitions;

• Adjusted CSOI does not reflect any interest expense or the cash requirements necessary to service interest or principal payments on any indebtedness that we may incur;

• Adjusted CSOI does not reflect any foreign exchange gains and losses;

• Adjusted CSOI does not reflect any tax payments that we might make, which would represent a reduction in cash available to us;

• Adjusted CSOI does not reflect changes in, or cash requirements for, our working capital needs; and

• other companies, including companies in our industry, may calculate Adjusted CSOI differently or may use other financial measures to evaluate their profitability, which reduces the usefulness of it as a comparative measure.

Because of these limitations, Adjusted CSOI should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, you should consider Adjusted CSOI alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Better yet, AQPQ explains the math behind ACSOI:

Groupon acknowledges that it is losing money when profits and losses are measured in accordance with Generally Accepted Accounting Principles (GAAP). The firm claims, however, that its profits and losses are more meaningfully measured by a metric they call Adjusted Consolidated Segment Operating Income (ACSOI).

How does this number differ from profits and losses that are measured in accordance with GAAP? ACSOI apparently includes all of the revenues, but only some of the expenses, that are recognized by GAAP. By excluding certain significant expenses, Groupon manages to convert its losses into profits.

So what is the SEC going to find? Accounting methods already confessed to by the perps? Big deal.

Review Wiley’s New FAR Test Bank App for Free

Wiley CPA Review has been cranking out mobile-friendly versions of its print titles, priced pretty close to their tree-killing counterparts.

Like these AUD Focus Notes On-the-Go for Android, which run $34.99. The actual bound version of the new AUD Focus Notes (not due out until December of 2011 according to Wiley’s website) is $40.

Wiley has an entire series of “candidate-friendly” (read: SFW) options for CPA review, including the online test bank and above mentioned Android (and iPhone) apps of their Focus Notes but making the Test Bank (some of you know this as the CD-ROM or software) available to Androids and iPhones opens up all new possibilities. Studying on the train or with a privacy screen in your own cube or in the bathroom (if they ask why you are in the bathroom so much, tell them sorry, must have been those hours I ate).

Per FCC regulations (I think), we have to say if we have been compensated to write a blog post about a product, service or company. We haven’t been paid to write about Wiley’s new offering but we were asked if we’d like to test one of their CPA review apps for free to write this post. I own a BlackBerry so that’s useless to me, plus I’m not (now nor ever) studying for the CPA exam. Therefore, Wiley has entrusted me to figure out which one of you gets a new FAR Test Bank app (presumably you need to have an iPhone or Android device to qualify).

We could have run some lame ass caption contest but instead, tell us in the comments how you best utilize the extra 30 – 120 minutes a day of review you can gain by studying from your mobile device. Creativity counts.

The answer with the most likes wins (unless Caleb and I reserve executive authority and declare it rigged and/or not funny, so don’t cheat by clicking 100 times from the client’s IP). Contest ends… uh… Friday 7/29/11 at 12:00 AM Eastern.

Be sure to use a real email address so we can contact you to let you know you’ve won, so trolls are disqualified.

All we ask is that you check in at some point and let us know what did and didn’t work (if applicable) for you. Get crackin’

The TaxMasters Guy Has Some Sage Advice on IRS Correspondence Audits

The advice was so good he had to send out a press release:

On the heels of a record reporting year for taxes, taxpayers should be wary – or at a minimum more informed – about audits from the IRS, according to Patrick Cox, CEO of TaxMasters (TAXS), the leading tax compliance and repayment services provider in the nation. According to Cox, the IRS will send out a record number of audits which can be misleading and even wrong.

“Over the past few years the IRS has been shifting gears to use correspondence audits – notices mailed to taxpayers usually showing an alleged discrepancy in a tax filing and asking for a manageable amount of extra money that is owed,” Cox said. “From my experience, most taxpayers – who did their taxes online or had an accountant or friend do them – are scared of the IRS and don’t know enough about their tax filings to argue the audit. Instead of making sure the IRS assessment is accurate, I think most taxpayers just cut a check.”

The latest Taxpayer Advocate Report showed that of the more than 1.6 million Americans who were audited last year, 78 percent received a correspondence audit, while only 22 percent were selected for an in-person examination. A large majority of the correspondence audits are sent due to unqualified or overstated tax deductions.

“Returns claiming tax deductions are the lowest hanging fruit for the IRS in a correspondence audit,” says Cox. “Unfortunately, there are an alarming number of taxpayers that make simple mistakes on the amount of deductions and types of deductions they make and wind up being easy targets for the IRS. A few examples of typically-encountered discrepancies include unreported pension income, home mortgage interest, and cash charitable contributions.”

Conveniently, the Journal of Accountancy also covered the increase in IRS correspondence audits in its August 2011 issue and offers tips on how to manage them for CPA tax practioners.

According to a 2006 report by the Treasury Inspector General for Tax Administration (TIGTA), there has been a 170% increase in correspondence examinations for individual taxpayers with gross incomes or business receipts of at least $100,000 in fiscal years 2002 through 2005, while face-to-face examinations increased by 25%. Since that report, TIGTA has claimed improvements in this area but identifies work yet to be done.