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.

>75: Seriously. Enough with the “Am I Outdated?”

Thumbnail image for ben bankes at the NYC marathon.jpgEditor’s note: Welcome to a special Wednesday edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
Enough with this question, I’m going to start emailing students this article directly.
First of all, if you don’t send me questions, I can’t answer them. No question is too stupid, trust me, I’ve been in CPA Review for almost 3 years. They don’t tell you kids shit about the exam in college, better to ask than listen to some guy you work with (he’s wrong 87% of the time – or so I have calculated from professional experience via our students). So send them in. I’ll try to be nice and at least sort of useful.


That being said, I keep getting the question at work about materials. 2010 materials. Updates to 2009 materials. Being the most up-to-date in the cubicle farm. I got it, your brain is programmed to think December 31st equals a whole new year. How many of you are getting married this 31st, btw? Happy Anniversary to my boss – the CPA – and his wife on that fine day that you CPAs love so much. Deductions, bitch.
As previously disclosed, the AICPA Board of Examiners doesn’t want you to know they’re cheap. Those difficulty-weighted questions cost a whole shit ton of money to pop in that exam (speaking of which, any IFRS experts out there willing to contribute their time to screwing with CPA exam candidates? Prestige! Honor! No money though.) and the BoE likes questions that have a little more, erm, staying power. Those guys’ “creativity” keeps me in a job so I can’t really elaborate, you get the point.
That means you’ve got a 6 month window to work with from the time pronouncements are announced and when they actually start appearing on the exam. They might appear earlier as pre-test (not counted toward your score and about 15% of exam content) but unless specifically noted – as in SFAS 141(r) – pronouncements trickle into the exam slowly and on a delay.
When new exam content does appear (as it does twice a year, inevitably), it tends to be introduced slowly. Think about it – the only test run those questions got was pre-test, and you were not expected to know that information anyway. How can they gather intelligence from candidates’ collective knowledge of things they don’t know? Seems bizarre to me but whatever, can’t question the wisdom of the AICPA.
Except in the case of the Feed the Pig campaign.

The Return of Capital?

Thumbnail image for Thumbnail image for magic money.jpgAfter last week’s talk with Sam Antar, he got me thinking about our major capital problems, reminding me of something I’d seen earlier in the year on the world running out of capital.
How is that even possible? Isn’t capital just an accounting entry?
In the April piece, it was argued that the global capital trench is not possibly large enough to cater to the budgetary debauchery of the Obama administration. The stimulus. Health care. Afghanistan. Pick one and you can easily identify where the problem lies; put them together and you realize that we are fighting an uphill battle against investor demand for risky assets – including sovereign debt. In other words, T-bills aren’t what they used to be.


So how can regulators impose stricter capital requirements when trillions in fake capital built upon fantasy accounting in the years leading up to the financial crisis was vaporized?
Credit Suisse believes new capital requirements in Europe will cost affected banks £33 billion, some of which will inevitably come from those banks’ clients.
FT Alphaville:

Indeed, one of the theories about why lending by UK banks has yet to pick up — despite the Bank of England’s QEasing efforts — is that banks have been preparing for higher capital rules just like the ones above. That rather implies there are, perhaps less expected, costs for consumers as well.
As the FSA notes in the consultation:As noted in Table 1, costs for firms will rise substantially as a result of these measures and these costs will be passed on, at least in part, to consumers. This increase may manifest itself as lower deposit returns and higher borrowing interest rates. The extent to which this occurs depends on a number of factors, including the extent to which firms may already be able to charge above competitive prices for some products.

Know what’s happening? You’ve got to pay back your share of that fake capital vaporized in the decoupling process. You borrowed against it and bought crap with it and got a raise because of it and now you’ve got to give it back.
That’s all.

>75: The ‘Magical’ Order of CPA Exams

BelushiCollege_CPA.jpgEditor’s note: Welcome to latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
Just a reminder, if you have a CPA exam question for us, be sure to send them over. No question is too stupid, trust me, I’ve been in CPA Review for 3 years and have heard them all.
For today’s >75, let’s talk picking exam parts, shall we?
I get asked these questions at work constantly: “What part should I start with? Which is the easiest? Which is the hardest?”


My answer is always the same: there is no “easy” or “hard” section, they’re all equally and independently difficult for their own reasons. FAR is “hard” because of the sheer volume of information but believe it or not, BEC tends to be the part candidates struggle with most. AUD and REG have a slightly higher national pass rate but that does not make them any easier than the other two.
For now, I’ve been advising candidates to start with FAR so they can get it out of the way before IFRS hits the exam in 2011. In general, however, I advise our students to start with the part that they feel will be most difficult for them since your 18 month clock starts ticking once you pass the first part. If a candidate is going to struggle to pass one section, it’s best to do this before that 18 month period starts since the very last thing you want to do is to retake a section you already passed because you couldn’t pass that final part in time.
Point being, there’s no such thing as easy when it comes to the CPA exam. Nor is there a such thing as a “magical” order for taking the exams. But here are some tips for figuring out which part to start with:
• Anxious candidates with a confidence problem – Start with Audit or Regulation, whichever section will be easiest for you since, as I said above, these tend to have a higher pass rate. Passing that first section will be a huge motivator to keep you going.
• For candidates looking for “the easy way out” – Start with FAR. Since this section is the largest, getting it out of the way first will make the rest of your CPA exam experience seem downhill.
• For candidates planning to take the exam through 2011 – Get FAR and BEC out of the way now. Communications will be hitting BEC in 2011 so if you get it done now, you can take AUD and REG in 2011 when they no longer have communications. Win!
Good luck!

The PCAOB Setting a Precedent…for the Fed?

jump to conclusions.jpgFirst of all, before I go anywhere with this, I know GC already gave her a link but this recent Re: the Auditors post on, well, auditors — or rather the lack thereof — is a do-not-miss. It is especially relevant when we’re talking about the usefulness of audits, PCAOB or otherwise.
Anyway.
As many of you already know, the PCAOB is on the chopping block and bad. While we’ll have to let that one work itself out in court, the case against the PCAOB is actually an all-too-familiar argument.


The Federal Reserve System (much like the PCAOB) pulls its regional bank presidents not under direct Presidential directive but because that’s how it has always been. The President appoints a Fed Chairman of course but beyond that, Washington tries to stay as far away from the regional Fed bank structure as possible. Why? That question is a tad too complicated to answer here, so we’ll get into that another day.
The important part here is that the Fed should be closely watching the PCAOB case in the Supreme Court. If the PCAOB is brought before the people of the United States to answer for its alleged recklessness as an agency free from Presidential influence, the Fed may follow soon after.
WebCPA:

The plaintiffs argued that the PCAOB violates the separation of powers principles in the Constitution because the PCAOB’s members are appointed by the SEC and not directly by the president, and they cannot be fired except for cause. Several justices indicated some sympathy for that viewpoint in their questions.

Gee, that sounds just a little too familiar. Seeing as how two-thirds of regional Fed bank directors are chosen by the very banks those regional banks “supervise”, the Fed may have some ‘splaining to do.
So while Bernanke is out there running PR for the Fed System to keep nosy Congressmen out of their business, where is the PCAOB defensive play against SCOTUS? Don’t they have anything to say in their own defense? Apparently not if my experience is any indication.
While most of you know I am not exactly a cheerleader of the PCAOB nor the Fed, I can’t see how consolidating all of our power in Washington can be a benefit either. There is something to be said for the wacky structure of these agencies as it is a Frankenstein of influence instead of a concentrated wave of power emanating from DC.
So watch the PCAOB case closely, Ben Bernanke, it could be you next and you don’t want to have to explain why the banks you regulate pick the soldiers of your precious System.

Because There is No Shortage of Criminals

fraud.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Over the weekend, I had the pleasure of speaking with Sam Antar of White Collar Fraud. I won’t give him too many props (lest he think his wily criminal charms got to me) but our conversation was both relevant and disconcerting.
In case you aren’t acquainted with Sam, he’s the ex Crazy Eddie CFO who ripped them off and now does speaking tours talking about, well, crime. But there’s a lot more than that at work here, that’s just his schtick.


So what did I learn?
I believe my editor thinks I’m a doom and gloomer so here’s some good news: besides suggesting we start training more qualified forensic auditors fresh out of school, Sam insists there is a chance for real financial reform.
Do you take your reform advice from an ex-criminal? I remind you here that a tax cheat is in charge of the IRS, do with that information what you will.
Anyway, the point here is that financial statements lack integrity. Without integrity, investors are groping in the dark and criminals are able to execute their schemes. Foreign investors are scrambling to leave US capital markets, could that be because our statements are – generally speaking – unreliable?
So. Sam’s 3 step plan to restoring sanity to financial statements. Take it for what it is.
1. Redefine audit committees as truly independent. No member of the audit committee should derive a salary or other compensation from stock options or stock holdings. Period.
2. Committee members should be qualified. CPAs and securities lawyers are qualified to sit on an audit committee, not marketing managers and other “average” sections of the corporate population.
3. Forensic accounting should be standard curriculum in university accounting programs. Don’t eliminate 404(b), if a corporation can’t afford the audits required to be a public company, then don’t become one.
We’ll have to agree to disagree on that final point, I don’t think tedious audits are the solution. However, perhaps if we had more qualified auditors out in the trenches, I might be inclined to be slightly less skeptical about the effectiveness of more softcore audits.
Stay tuned as we’ll be picking Sam’s brain again soon.
GC Posts Referencing Sam Antar:
Grant Thornton: Patrick Byrne’s Pants Are on Fire
Obvious Sign of Fraud: You’re Having Sex with the Client

>75: What Happens When You Get a 74?

agony.jpgEditor’s note: Welcome to latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
It might be the worst feeling in the world. Trust me, I know people who have gotten 17s and 24s on the exam – these are not my CPA Review students, of course, these are people who tried to go the CPA exam alone – and a 74 beats their misery any day of the week.


Nearly 99% of the candidates I talk to (I’m making that percentage up off the top of my head, mind you) who get a 74 on any part of the exam did everything they were supposed to do. They did hours of multiple choice and tons of practice simulations and even did the tutorial at cpa-exam.org before test day.
These are people who asked me very early on how they could plan their time, requested updates weeks before they were available and had me emailing 3 years’ worth of previous CPA exam questions for them to practice on. From all appearances, they did everything they were supposed to and yet got a 74, the worst possible score you can get (17 on FAR aside but we won’t talk about that mmmmmkay?).
So what do you do if you’re that person?
• Don’t bother requesting a “rescore” from the AICPA Board of Examiners: For all of 2008, not a single rescore request resulted in a candidate going from FAIL to PASS. It’s a waste of time and money and the AICPA isn’t going to admit their CBT is at all faulty (those of you who have actually taken it probably know better but we won’t talk about that either) so accept your score and move on.
• Don’t move on to a new section While you have to deal with the fact that you’re going to have to pay re-application fees to the Board and another exam fee, the best thing you can do in the case of a 70 – 74 is to go right back to that section and schedule a new exam as soon as possible. A 74 especially shows that you have an excellent command of the information, just a little more studying and you’re over that hump.
• Look at your score report: Your score report is going to give you quite a bit of insight on where you went wrong the first time. When you fail an exam part, they go so far as to tell you where you failed the worst, USE THAT! When you go back over your review materials, there’s no need to watch every single lecture video again fourteen times – just look at the report, figure out where you need more work, and do extra practice questions in those areas.
Finally, don’t beat yourself up. If this exam were easy, everyone would be a CPA.

Can the FTC Even Deliver on Newspaper Bailout Promises?

newspaper-pages.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
For months there has been the underlying hum of a newspaper bailout in the air – not much surprise there given dropping subscriber numbers and dwindling ad revenues. But in lieu of an actual bailout (i.e. a check from the Treasury), how about some tax breaks and anti-trust waivers?
NY Mag:

At a workshop on the the [sic] future of journalism yesterday, the head of the Federal Trade Commission said the agency is studying ways to help struggling media companies struggle a little less. What might this help look like? It could come in the form of new anti-trust laws, tax breaks, government subsides [sic] or even changes to copyright law.

Well if “journalism” involves rampant copy errors like that, we’re more screwed than it appears.
Tax breaks for mainstream media? Why? I’m a fringe journalist and I still have to pay my taxes, if I don’t bother to tailor my content to my audience to the point that it draws enough ad revenue to pay my bills, maybe I don’t deserve to eat that week.
It gets better.
Rupert Murdoch has long fought Internet news aggregation and would love to see a pay-per-view program for news that — holy shit! — might actually save news. Where do you get yours from? Would you pay for it?
In recent comments, he basically called every blogger who has ever clipped a news article a thief, including Arianna Huffington. You may have heard of her.
Fine, charge for it. I’d pay if it was worth paying for. Would you pay for the recent CNN article that said the Big 87654 ended with more employees than they started with? Me neither.
Point being, Murdoch would rather see news sites charging than peddling for a bailout. I don’t seem to recall major media outlets begging for any bailouts recently, which naturally inspires a healthy skepticism towards the FTC’s comments.
Has the FTC checked this proposed mainstream media bailout “tax break” with the Treasury? Because if I heard correctly, we have $30 billion to put towards Afghanistan now, not to mention the fact that the FDIC is broke and Citigroup is probably going to need a Dubai backstop. I’m not sure if Timmy would be okay with this, better ask him first.

Buy Nothing on Friday? How About Cyber Monday?

overtheshoulder.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
I’ve got something lined up for Jr Deputy Accountant this morning on Cyber Monday that I just had to repost over here. Normally it’s the other way around but I wanted to make sure to get this point across.


I always think about the guy who posted the comment about “you idiots worried about flashcards should have been the ones laid off” on a Ernst & Young layoff post we did here when I think about the crowd mentality that motivates bizarre events like Black Friday and Cyber Monday.
We did Buy Nothing Day in the hopes that you all would stay home Friday and save your pennies but I want to make sure my point is being received correctly. If you can afford it, go get it, no one cares. But don’t go just because the shiny advertisements are trying to seduce you with 60% off if you can’t even afford 95% off.
As I said on JDA this morning:

I will be doing my best to resist Cyber Monday since it’d be awfully hypocritical of me after evangelizing Buy Nothing Day but I have a vacation flight to catch in less than 2 weeks and only a few good shipping [sic] days left.
The point has always been this: if you can afford it, by all means, please buy it. If you want it and you bust your ass to pay for it and it won’t put you underwater to get it, have at it! Please!
I have “disposable income” down to a science and it doesn’t take a mathlete to do so: take what you need (I should not have to define “need” for you) minus what you make, putting investments and savings in the “need” column instead of dividing the take after needs – net income and viola [sic]. Go buy some shit.

Come on, CPAs, those numbers check out, right?
Like I said, I’ve got a trip coming up but no mortgage (or CPA exam retake fees. You know who you are — knock it off with the half-assing it through the exam already — it adds up) so I might need some crap for said trip. I’m not saying you should lock your doors and put your credit card on ice but I also have a job and residual writing income. Do you?
Stay away from Cyber Monday also if A) your boss is watching you and/or B) you can’t afford it. Otherwise go forth with my blessing and may all your security codes match your billing address.

A Thanksgiving Reminder from >75

turkey.jpgEditor’s note: Welcome to latest edition of >75, our weekly post on questions that you have related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.
For CPA exam candidates, the final few weeks of the year can be a time of extreme pressure and/or procrastination. I won’t name names and bust any of our CPA Review students out (you know who you are) but I can tick off at least 25 people taking the exam today and next Monday, trying to squeeze in one last part before the New Year.
So how exactly is one supposed to show up for an exam the Monday after Turkey Day before the tryptophan coma has worn off?


• Plan better next time: This is a terrible time of year to be sitting for the exam but unfortunately it’s also the busiest. More candidates cram into the final testing window of the year than any other window so if you’re testing in the 4th quarter next year, keep that in mind when you’re scheduling your exams. Schedule early and don’t get stuck testing the week after Thanksgiving.
• Prioritize: Do you really need to hit your parents house, your in-laws’ house and your best friend’s grandma’s house for Thanksgiving? If you’re really serious about preparing through the weekend (which you should have already been doing weeks before this), cut dinner short, stick to one holiday meal and spend your Black Friday studying instead of getting trampled in the Wal-mart parking lot. It’s better for your brain and better for your wallet.
• You might have to have a chat with friends and family: If you’re trying to get a section in right when 2010’s first window opens up, you will be doing some studying through the December holidays and your absence might cause just a little bit of resentment. If you’re serious about getting the exam over with, sit down with loved ones and let them know that you need their support, not their shit. They have no idea what you are going through unless you tell them to back off and give you the time you need to study. And if that doesn’t work, coal for everyone in their stockings.
• My final point is this: it goes without saying that the holidays can be a stressful time for everyone and we all know what sort of stress taking the CPA exam causes. Mixing these two can be a dangerous cocktail of end-of-the-year misery if you don’t stay focused and plan your time accordingly. And look at it this way, you might get out of having to wear an ugly sweater or two.

Buy Nothing Day. Just In Case You’re Off Friday (or Unemployed)

creditcard.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
If you’re trying to squeeze in one last section of the CPA exam before December hits, you’ve got four days – a handful more if you’re not running off to see family for Thanksgiving. Are you working through the holiday?
Instead of running off to the store to spend money that you don’t have in the name of “economic recovery”, how about “Buy Nothing Day“?


“We’re asking tens of millions of people around the world to bring the capitalist consumption machine to a grinding — if only momentary — halt,” reads the manifesto. “Advertised” as an international event intended to stop the rape and pillage of the planet in the name of consumption (or something like that), it doesn’t stop with avoiding the Friday after Thanksgiving sales.

We want you to not only stop buying for 24 hours, but to shut off your lights, televisions and other nonessential appliances. We want you to park your car, turn off your phones and log off of your computer for the day.

This particular capitalist wouldn’t do well without her BlackBerry and her credit card for a full day, it’s one or the other, with the credit card much easier to keep in my pocket than the device. But whatever.
Other clever ways to spend the day? How about Whirl-mart; an impromptu conga line of shopping carts in the middle of any large warehouse or retail store (Target would work in a pinch) much to the chagrin of store security?
You can even take it all the way and declare a Buy Nothing Christmas if that’s your thing. Why stop with Black Friday? It’s not like you can afford crap your friends and family don’t want anyway, so just don’t do it. Sock away some money and put it into something useful like gold ETFs or at least new gadgets.
It goes without saying that retail has a long hard slog upward this winter. In fact, some stores are opening on Thanksgiving just to get a jump on the holiday season, hoping they can squeeze out every little bit they can to make it through the end of the year. Yeah, good luck with that.

>75: What am I Supposed to Do With This Ethics Exam?

Editor’s note: Welcome to latest edition of >75, our weekly post on a question related to the CPA Exam. Send your questions to tips@goingconcern.com and we’ll do our best to answer as many of them as possible. You can see all of the JDA’s posts for GC here and all our posts related to the CPA Exam here.

If you are in an ethics exam state and trying to figure out how to pass it (first of all: fail), don’t worry, I’ve got some advice. An email from a reader who prefers not to expose his unethical-ness comes to JDA thusly:

I’m having trouble passing the ethics exam, I’ve failed twice. How can I pass it?


First of all, I’m going to ignore the fact that this question — by itself or to a casual observer not in public accounting — is pretty fucked up. You shouldn’t need help with this. I can understand needing an explanation on how to get your foreign degree evaluated (I still don’t quite get it) but this should be easy. However, for the purposes of this post, I’ll disregard that part.

For starters, the ethical thing to do would be a Google search on the ethics exam, not posting Craigslist ads offering to pay people to take it for you. But if you’re like most public accountants trying to get a license, you copy off of your coworkers. I shouldn’t have to tell you that. If I do, it probably means you’re not cut out for this line of work.

There are other things you can do. Some state societies of CPAs have resources like tips or even experts you can consult to help you. Again, this shouldn’t be hard, it’s supposedly your first mandate in public accounting.

It’s open book, there’s no timer and you can bring a weapon to wherever you’re taking the test (unlike the CPA exam itself). Why are you making such a huge deal out of this?
Abacus said the Wisconsin ethics exam, while being tough, just needed some diligence to get through. What’s scary about that?

If you absolutely run out of ideas, some ethics exams have a “Lifeline”. Here in California, if you bomb three times, you can call CalCPA’s Education Foundation and they might give you a hint or two along with three more chances to pass.

Give it enough time and understand the subtle nuances of the questions, don’t just try to barrel your way through it and you might pass this time. Good luck.

Not Another Task Force

GOVT.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Our dear President has created a “Task Force” to handle those tricky problems like baby Madoffs so we can sleep at night knowing we are safe from the financial crooks robbing us blind.
Or can we?


WaPo:

Top Obama administration officials on Tuesday announced a new federal task force to combat financial fraud after deciding that the number and complexity of investigations linked to the economic crisis require a more coordinated response from government agencies.
Created by executive order, the Financial Fraud Enforcement Task Force targets fraud related to mortgage lending and modification, securities law, stimulus spending and the government’s bailout of the financial sector.

Meanwhile, in absolutely related news, ABC News discovered this week that Recovery.gov shows stimulus funds saving or creating jobs in Congressional districts that don’t even exist. There are tons of them so no one tell me that it’s a rounding error.
Oh wait, they admitted they screwed up and are now fixing it.
Back to this “task force.” Maybe I’m confused but don’t we already have something like that and it failed to get the first Madoff?
The Department of Justice-led task force will include officials from the SEC, Treasury, and Department of Housing and Urban Development. Sounds like a winning crew.
Attorney General Eric Holder insists that one of the task force’s main targets will be “Recovery Act and rescue fraud,” insisting “we will ensure that the taxpayers’ investment in America’s economic recovery is not siphoned away by a dishonest few.”
A dishonest few?
Like the 95 completely made up people on the Recovery.gov website who worked on that sewer project in Wisconsin?
Or the Georgia Head Start administrator who was advised to claim “317” jobs where his organization had really only gotten raises for its 317 employees?
The AP has been watching the stimulus numbers closely, and they continue to check out wrong. It doesn’t take an accountant, nor a task force, to figure that out.