Bloomberg reports, that E&Y was sued for “negligence, malpractice and breach of contract in connection with audits of financial statements over a five- year period,” which sounds like the standard fair in these matters. The pleasant surprise being the brevity of the suit. “The two-page filing doesn’t provide any details of the allegations against Ernst & Young,” which may cause you to wonder if it’s really just a one-page lawsuit (unthinkable, I know) with the second page simply stating, “This page is intentionally left blank.” Of course the downside here (aside from another lawsuit being lumped on the pile) is that E&Y’s lawyers won’t get a chance to rack up many billable hours just yet. Which is to say, there is no downside. [Bloomberg, Earlier]
Author: Caleb Newquist
Founding editor, Going Concern.
SEC Needs More Time to Get Their Heads Around IFRS
A recommendation on whether U.S. companies should switch to international accounting rules will take a few more months, the Securities and Exchange Commission’s chief accountant said Monday. The SEC’s staff had been expected to make a recommendation by year-end on whether U.S. companies should adopt the global rules, known as International Financial Reporting Standards. But the staff needs “a few additional months” to complete its work, SEC Chief Accountant James Kroeker said. [WSJ]
Oh For God’s Sake, Bank of America’s Former CFO Is Being Appointed Chairman of a Council That Advises the FASB
Chuck Noski was CFO of BofA for only one year and is still a vice chairman at the bank and is probably a very competent individual but Jesus, has the Financial Accounting Foundation no sense of the reputation of this particular bank? Further, have they heard nothing about the collective reputation of banks these days?
Mr. Noski’s appointment was announced by John J. Brennan, chairman of the Board of Trustees of the Financial Accounting Foundation (FAF). The FAF is responsible for the oversight, administration, and financing of the FASB and its counterpart for state and local governments, the Governmental Accounting Standards Board (GASB).
“With his breadth of experience in corporate finance across a range of industries, Chuck Noski will bring to the FASAC a deep understanding of the complex issues facing the FASB as it seeks to serve the best interests of all those who use, prepare, and audit financial statements,” Mr. Brennan said. “We are very pleased to welcome him as the new FASAC chairman.”
At least the ABA will have a direct line for their hate mail now.
[via FAF]
Report: PwC Boston Holiday Party Is Wicked Awesome
This time of year, many a capital market servants look forward to blowing off a little steam at the annual holiday (aka Christmaskuh, Festivus, et al.) party. Last year, the festivities made a comeback after a couple of years of more restrained celebrations. Ernst & Young’s New York office even threw a party at Cipriani’s the week Andrew Cuomo handed down his civil fraud lawsuit. And in case you’re skeptical that the get-drunk-dance-like-an-idiot-go-home-with-a-co-worker party have made a comeback, this post from Socialite may be the latest proof:
Want to talk about “work hard, play harder“? The auditors, tax specialists and consultants at PwC have got that down to a science!
2000 people + Marriott Coply+ open bar + gambling + dancing = Ballin’ time
We’ve been to some corporate Holiday parties in our day, but this one definitely takes the cake. And why wouldn’t it… we’re guessing they threw down well over $500K to host that.
Since we’re not hip to the costs of corporate holiday ragers these days, it wouldn’t be fair to dismiss this guesstimate outright. And it’s not exactly clear how Socialite got all these details but it sounds pretty similar to the KPMG Christmaskuh party I attended in 2008 (sans gambling) which was the waning days of the big holiday blowout party.
ANYWAY, Socialite then outlines a number of reasons that you, local Bostonian, should be at this shindig next year, including some “Secret Grand Prize Giveaway” which they speculate is “a small yacht” but in reality, it’s more likely to be a pair of cool shoes.
For any mini BoMos in Boston, does this sound like the party you went to? Is $500k in the ballpark or would you put it in the seven figure range? Feel free to speculate at this time. And if your party tops this one, email us the details (or an invite).
Accounting News Roundup: Fired E&Y Partner Accuses Firm of Corruption; The Latest ‘Serious’ Tax Cut Plan From Dems; Grover Norquist’s SNL Moment | 12.05.11
‘Dismissed’ partner accuses Ernst & Young of corruption [Telegraph]
Accountant Ernst & Young is facing an allegation of corruption at one of its global headquarters as part of a whistleblowing case brought by one of its ex-managing partners.
Cuomo Pushes New Tax Rates for Big Earners [NYT]
While Mr. Cuomo did not provide specifics on his tax proposals, he and legislative leaders were negotiating a deal, the officials briefed on the plan said, that would allow the state’s so-called millionaires’ tax — a surcharge on incomes over $200,000 for individuals — to lapse as scheduled on Dec. 31. But one or more new tax brackets for high-income earners would have those individuals paying less than they did under the surcharge — allowing officials to say that the millionaires’ tax had lapsed — but paying at a higher rate than they would have been under existing tax brackets.
Zynga Eyes $1B in Biggest Web IPO Since Google [Bloomberg, S-1]
Zynga Inc., the biggest maker of games on Facebook, is seeking as much as $1 billion in the biggest initial public offering by a U.S. Internet company since Google Inc. (GOOG)’s debut. The company is offering 100 million shares for $8.50 to $10 apiece, according to a regulatory filing today. The high end of the range would value San Francisco-based Zynga at $7 billion.
Enron’s Tenth Anniversary: Conclusion—Or Is It? [GOA]
The Grumpies are thankful for Enron because it gives them a lot of blogging fodder.
Senate Democrats to Offer New US Tax Cut Plan [Reuters]
U.S. Senate Democrats plan to offer a new proposal on Monday to extend a popular payroll tax cut amid signals that Republican leaders would accept a compromise that covers the cost to the federal Treasury. Senate Budget Committee Chairman Kent Conrad, a Democrat, said that the offer would be a “serious attempt to move this ball forward,” and avoid a Dec. 31 expiration of the popular tax cut.
Grover Norquist on Saturday Night Live [TaxProf]
Former Andersen CEO Joe Berardino Admits That We’re All Just As Stupid Now As We Were When Enron Went Bankrupt
[caption id="attachment_52236" align="alignright" width="150" caption="People are still letting this man speak."]
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Of course CNBC would put this guy on TV today.
Asked whether lessons had been learned since Enron filed for bankruptcy, Berardino said, “we’re still learning” and pointed to the sovereign debt crisis currently engulfing the euro zone. “(Enron) ran out of time in terms of its liquidity and a lot of the same elements — leverage, the need for liquidity, crisis when you lose confidence — are repeated in all those examples. And I would argue we’re now living through it with the sovereign crisis in Europe,” he said. “There are a lot of the same elements.”
Look, You Guys, You Should Really Be Thankful for Enron’s Bankruptcy
One of the first things I saw this morning in my Twitter feed was this missive from one of the Grumpy Old Accountants, Ed Ketz:
Now, I don’t know Professor Ketz personally, but my highly acute sarcasm detector is going batshit crazy. Less subtly, MACPA Editor Bill Sheridan gives us the timeline of the events that transpired starting with Enron’s filing. Bill gets a little weepy about the whole affair, writing:
Remember how utterly chaotic that time was? News that shook CPAs to the core surfaced almost daily, and the next day brought even worse news.
Okay, I was in college when Enron went bankrupt so I don’t remember things being “chaotic” unless you count the whole “9/11 was less than 3 months ago” thing. What I do remember was an Andersen partner who came to campus for our Accounting Society meeting (BAP didn’t have a chapter at my school) alone and he didn’t really seem to know anything more than what I imagine was being reported in the news and our faculty advisor noticed it too. So for him and his fellow partners, yes, things were probably royally sucking. And yes, things did get worse when Andersen was convicted* of obstruction of justice, surrendered their state licenses and closed up shop.
So maybe all that stuff is bad. Maybe it’s really fucking bad and it causes people to cringe to think about it but even Bill sees the upside:
You could argue that the profession is better off because of it. We took our lumps, rolled with the punches, and emerged on the far side stronger and more trustworthy than ever. “That which doesn’t kill you,” etc., etc. Still, I’m not in any rush to go through something like that again. Are you?
Jesus. Can we quit acting like Enron is still a big deal? Lehman Brothers was the size of ten Enrons. TEN. And Ernst & Young, no matter what happens, looks like idiots and continues to claim that they bear no responsibility and everything is still hunky dory. Andersen got off easy. Enron went bankrupt. The firm got fired. And fired again. And again. Then the firm died. The end. Their partners and employees moved on and everything was cool. I mean seriously, even C.E. Andrews got another job. If Ernst & Young continues on, they’ll have this hanging over them until something worse happens. Enjoy that.
But back to Enron. Thanks to Enron, we got Sarbanes-Oxley. We got The Smartest Guys in the Room. And we got that awesome Heineken ad. If you think about it, lots of you probably got your job thanks to Enron. Which means you probably owe your house, your spouse, your dog and a whole bunch of other shit to Enron too. You should be thanking your lucky stars that Jeff Skilling was such a ballsy mark-to-market wizard.
And yet people choose to remember it as, “That one time where we almost DIED!” And the mainstream press, in its blissful accounting ignorance, loves to dig it up in every article that is remotely accounting related.
I don’t know about you all but I’ve moved on. Enron was this bad thing that happened to the accounting profession but other bad things have happened – far worse things – and other equally bad things will happen. Maybe if people had learned something the last ten years and tried to do things better instead of maintaining the status quo, there wouldn’t be a French guy busting your chops. Here’s to the next 100 years. Thanks, Enron.
*SCOTUS overturned the conviction on a technicality (apparently an important one) but that doesn’t bring the firm back now, does it?
There Are a Lot of Hungover, Newly Chartered Accountants in Canada Today
We like to cover the international scene as much as we can but it can be tough sometimes when NO ONE EMAILS US. If you’ve got some from north or the border, south of the equator or across an ocean, simply email us at tips@goingconcern.com and we’ll spice things up around here with some international flair.
I only bring it up because this morning a Canadian reader informed us that today is a big day up north.
I’ve noticed the content on GC is nearly entirely CPA-focused, even though there’s plenty of readers from north of the border! I realise this is likely partially due to the fact that Canadian readers aren’t helping contribute enough. In an effort to help spread the love, I provide the following:
As a bit of background to our system, Canadian Chartered Accountants (CAs) must pass a single national final exam called the Uniform Evaluation (UFE). The UFE is a three-day national exam held once a year in September. The results are then released nearly three months later, usually on the first Friday of December (today!). It’s generally tradition for all the writers (and those that support them) to head out to the bar the night before to help ease the anxiety of checking the results in the morning, which leads to a lot of cheerful new CAs with hangovers today. This tough day of work at my firm (and many others) consists of champagne breakfast with colleagues, lunch with the partners and the office heading back to the bar by 3pm.
Congratulations to all the new CAs!
Scores are officially released at 12 pm so if you’re waiting to enjoy some Mimosas until you get the official word, that’s your choice but either way, you can use this post as a thread for your pre-noon-newly-minted-CA-partying purposes.
Accounting News Roundup: IRS Backs Off Americans in Canada; Coming Around on Auditor Rotation; Connecticut Welcomes Grant Thornton | 12.02.11
U.S. Adds 120,000 Jobs; Unemployment Drops to 8.6% [NYT]
November’s jobless rate was the lowest recorded since March 2009. The rate fell partly because more workers got jobs, but also because about 315,000 workers dropped out of the labor force, and the jobless rate counts only people who are actively looking for work.
Boehner Predicts Extension of Payroll-Tax Cut [Bloomberg]
The first attempts to prevent a payroll tax cut from expiring Dec. 31 fell short in the U.S. Senate, even as House Speaker John Boehner expressed confidence that Congress would extend the tax break and unemployment benefits. “There is enough common ground between where the White House and Democrats are and where Republicans are for us to move this legislation and to do so quickly,” Boehner told reporters yesterday.
MF Global accessed client funds for weeks [FT]
MF Global had been dipping into client funds for weeks before its failure – rather than just in its final days as had been previously reported – say US authorities investigating the broker-dealer’s collapse. This comes as the failed company’s bankruptcy trustee revealed that some customer money from MF would never be recovered.
U.S. taxman to go easy on American residents in Canada [GM]
The U.S. Internal Revenue Service is poised to waive potentially massive penalties for Americans who agree to come clean and don’t owe any taxes, The Globe and Mail has learned. The new rules will be announced within weeks by the IRS, according to David Jacobson, the U.S. Ambassador to Canada, who has been swamped with complaints from anxious Canadians. “What the IRS is saying here is that if … you don’t owe taxes to the U.S., and you file your return and they show you don’t owe taxes, there aren’t going to be any penalties for having filed late,” Mr. Jacobson said in an interview Thursday.
Real Housewife Tax Cheats of Orange County [Tax Update]
I’d be okay if they were all sent to jail.
Proof That Auditor Rotation is a Good Idea [The Summa]
The U.S. Chamber of Commerce helped Prof. Albrecht come around on this one.
Tax man pierces ‘Entourage’ star Turtle’s shell [Tax Watchdog]
Anyone have a spare $648k to loan Turtle?
Wells Fargo Sues U.S. Claiming Excess Taxes [Bloomberg]
Some excess payments were caused by “computational and data entry errors” by the Internal Revenue Service, and the government hasn’t acted on its claim for a refund, Wells Fargo said today in a lawsuit filed in the U.S. Court of Federal Claims in Washington.
Grant Thornton LLP Acquires Assets of CCR LLP [GT]
Hello, Connecticut.
McGladrey Is Glad to Have McGladrey Back, Says McGladrey Partner
Back in August, we learned that 1040 factory H&R Block was putting RSM McGladrey (aka McGladrey) out to pasture. By all accounts, H&RB was pretty excited to get rid of RSM (aka McGladrey), as the business was a bit of a drag on the rest of the company.
Crain’s reports that the deal finally closed today and at least one McGladrey (aka McGladrey) partner is equally excited to have their old RSM (aka McGladrey) back:
The move means the reunited McGladery, which has 6,500 employees—600 of them in New York—should be better positioned to compete against such industry-leading firms as PriceWaterhouseCoopers and Deloitte. “We are a great alternative to the Big Four,” said Tom Ferreira, who heads McGladrey’s Northeast practice. […] “We’re happy to be independent again, all together under one roof,” he said.
Your loss, H&RB (not aka McGladrey).
SEC Asking FASB About Looking Into That MF Global Accounting Thingamajig
Because, you know, it’s sorta tricky and it didn’t really turn out so well for Corzine & Co.
The SEC is in talks with the Financial Accounting Standards Board, which sets accounting standards, about “repurchase-to- maturity” agreements that MF Global used in off-balance-sheet accounting, Schapiro said today during a hearing before the U.S. Senate Agriculture Committee in Washington. “We are talking with FASB about whether we need more disclosure of those,” Schapiro said.
Senator Kent Conrad (D-ND) seems a little more urgent:
“How is it possible that someone is able to bet the farm here, multiple times, and it disappears from the balance sheet because of this repo-to-maturity technique?” asked Senator Kent Conrad, a North Dakota Democrat, noting that the technique made it appear as though the risk had been “sold.”
“That is a loophole so big you can drive a Mack truck through it,” Conrad said. “If that’s not closed, we should ask ourselves what we’re doing.”
I think we all know what a lot of people at the SEC are doing.
MF Global Accounting Technique Under Review, Schapiro Says [BBW]