Author: Caleb Newquist

Founding editor, Going Concern.

Promotion Watch ’11: Ernst & Young Admits 548 New Partners Worldwide

Still a little perplexed that I have to find this out via press release but I understand that at least some of you are beating off clients…

with a stick.

Jim Turley, Chairman and CEO of Ernst & Young says, “Building the next generation of partners to lead our business is vital to our future. This year’s marked increase in numbers reflects our ongoing commitment to excellence and our confidence in the future.”

John Ferraro, Chief Operating Officer of Ernst & Young says, “These admissions are the result of a rigorous selection process and recognizes the significant contribution of each individual to our success. This is a strong vote of confidence in the leadership potential of these outstanding individuals.”

Congrats to the all the new partners at E&Y!

Toronto Protesters Have Some Choice Words for KPMG

Remember the cost cutting report that the KPMG presented to the City of Toronto? The one that said they should consider closing a few zoos, let the grass grow for an extra week and let the snow accumulate a few more inches before you they break the shovels out (despite the risk of more cracked tailbone lawsuits)? Of course you do. Yeah, well, some people aren’t crazy about it and figured camping out in front of the House of Klynveld with signs and a microphone seemed like a pretty good idea:

That’s right – Inhuman, bean counting purveyors of human misery and social retrogression. – I don’t even think I’ve heard Francine McKenna state something that incendiary.

Accounting News Roundup: Grover in the Times; Democrats Evoke Reagan; FASB Stalls on Lease Accounting | 07.22.11

Read My Lips: No New Taxes [NYT]
Grover Norquist gets a spot on The New York Times Op-Ed page.

Obama and Boehner Advance Toward Deal to Cut Deficit [WSJ]
Until now, Republicans have shot down every proposal that involved higher taxes. But Democrats could be the major obstacle to this package because they worry that upfront spending cuts would be ironclad while any tax increases would be subject to later agreement. With prospects of a government default looming in early August, leaders on both sides denied Thursdaose. But the White House provided an outline of the deal to Democratic congressional leaders, aides said.

Democrats Recall Reagan’s Tax Increases [Bloomberg]
Reagan, renowned by Republicans as a tax-cutter, also increased revenue about a dozen times when confronted with surging deficits. The Treasury Department has estimated those measures would be the equivalent of $300 billion annually today — more than what many Democrats are now seeking as part of a deal to raise the U.S. debt ceiling. That often-forgotten history has some lawmakers trading places, with Democrats hailing the former Republican president as an example for today’s budget negotiators.

Four More Credit Suisse Bankers Charged in Tax Case [WSJ]
U.S. prosecutors on Thursday charged Credit Suisse Group’s former top offshore banking executive in North America and three other senior bankers with defrauding the U.S. government, increasing pressure on the Swiss bank over U.S. customers’ secret accounts that the officials say were used to evade taxes. The charges add senior-level executives to an indictment filed in February against lower-level bankers who were charged with conspiring to defraud the U.S. by opening and maintaining thousands of offshore accounts for wealthy Americans with as much as $3 billion in hidden assets.

Congress Plans Oversight Hearing on IRS Tax Preparer Regulation [AT]
The House Ways and Means Oversight Subcommittee plans to hold a hearing next Thursday on the Internal Revenue Service’s recent efforts to step up regulation of tax return preparers. “This hearing is a continuation of the Subcommittee’s oversight of the IRS and the alarming rates of tax noncompliance,” Charles W. Boustany Jr., R-La., who chairs the subcommittee, said in announcing the hearing Thursday. “With so many Americans relying on paid professionals to prepare their returns, it is critical that we better understand what the IRS is doing and what impact the new regulations will have on taxpayers, paid tax return preparers, and tax compliance.”

PKF and BDO in hot water over China fraud [Reuters]
The fourth time was the charm for shareholders suing the auditors of Shenzhen-based China Expert Technology. China Expert shareholders have been trying unsuccessfully to sue the company’s accounting firms for failing to detect an alleged $132 million fraud. U.S. District Judge Alvin Hellerstein in New York has previously dismissed the suit three times, saying the shareholders’ claims were inadequate.

Florida Rep. Rivera faces federal probe over casino contract [MH]
Agents with the FBI and the Internal Revenue Service have begun interviewing witnesses knowledgeable about a $1 million consulting contract between Flagler Dog Track — now known as Magic City Casino — and Millennium Marketing, a company co-owned by Rivera’s 70-year-old mother and her business partner, according to sources familiar with the investigation.

Ex-NASA agent pleads guilty in church theft case [AP]
A former NASA special agent pleaded guilty Thursday to failing to report nearly $300,000 he stole from his Southern California church on his tax forms. Alvin Danielle Allen, 42, of Lancaster admitted before U.S. District Judge George H. King that he filed fraudulent tax returns from 2004 to 2008. He faces up to three years in federal prison when he is sentenced Nov. 7.

Accounting Cops Delay New Rule on Leases [WSJ]
The Financial Accounting Standards Board and the International Accounting Standards Board said they will reintroduce a revised lease-accounting proposal for public comment later this year, with changes from their original proposal last year.

‘Nerdy’ accountant ready to lead healthcare merger [Reuters]
For a self-described nerdy accountant who shuns attention, Express Scripts Inc (ESRX.O) chief George Paz just thrust himself into the limelight. With his $29.1 billion planned purchase of rival Medco Health Solutions Inc (MHS.N), Paz would run the clear leader in managing prescription drug benefits for millions of Americans.

IRS Whistleblower Office Issues Annual Report [TaxProf]
It was a banner year!

Are Accountants Planking at Work?

If you’ve been paying attention, you’re familiar with the lamest Internet meme since last year’s bros icing bros – planking.

Planking is a “game” that involves people laying face down in normal to not-so-normal places and then having a friend take their picture while the planking is occurring. It’s been going on for a couple of months now but right out of the gate it was abundantly clear that planking was STUPID. Not stupid in the sense that “you can die while doing it” stupid but more so, “you and your friends are idiots” stupid. Despite this, people are “crazed” with it because, obviously, they are losers. And maybe racist.

ANYWAY, I bring this up A) it’s a fairly slow news day and B) a friend of a friend of GC emailed us the following query:

This is kind of a random idea but when watching this video, http://youtu.be/vQNTN8Z8AJY, I was wondering if accountants are planking at work, especially at Big 4/Big Regional firms like on copiers, partners’ desks, etc and have captured them in a video or in pictures. Even though I think the concept is kind of lame, I think about doing it every day including planking inside of one of the partner’s convertible which he leaves the top down all day. I would love to see if anyone has any great planking poses at work.

Yes, I am really bored at work and my mind tends to wander (a lot).

No problem friend of a friend, it’s summer and you’re a CPA, so boredom happens. Here’s the video in question:

Quite the montage of planktitude, isn’t it? Someone even took the opportunity to plank during Carmageddon which resulted in “Plankmageddon” (obv).

But back to our reader – even though I’m against planking in a general sense, I would not oppose planking inside a partner’s convertible. Especially if you emailed the picture to us. Of course you would have to take great precaution to not be identified but it may be worth the risk. And that goes for the rest of you. If the clock seems to be moving backwards at any point this summer, you should consider planking and then sending us the pictures. I’ll put forth a few conditions for scoring:

• Planking on a manager’s desk – 100 points.

• Planking on a partner’s desk – 500 points.

• Planking on the office managing partner’s desk – 1,000 points.

• Planking on the client’s conference table – 1,000 points

• Planking in the lobby with your firm’s sign in view – 1,000 points

• Photo of the office managing partner planking on his/her desk – 5,000 points.

• Planking on a partner’s [insert luxury car here] – 5,000 points.

Of course this is not meant to discourage creativity on your part. If you have other suggestions, please offer them up below along with the points to be awarded. Happy planking.

Letting the Bush Tax Cuts Expire May Not Be a Violation of the Taxpayer Protection Pledge But Grover Norquist Would Still Advise You Against That Course of Action

As you well know, signing Grover Norquist’s Taxpayer Protection Pledge is the equivalent to having your name written in the Fiscal-Conservative-Starve-the-Beast Book of Life. If you break tservative credentials will go up in a poof of red, white and blue smoke, you’ll be bludgeoned to death with a rolled up copy of the U.S. Constitution and hopefully Ronald Reagan will have mercy on your soul.

Lately though, partly due to this little debt ceiling debate, the Pledge has come under increased scrutiny and after the Senate approved a repeal of ethanol tax credits without a corresponding reduction in tax rates, some suggested that it is meaningless. Since this is obviously nonsense, Grover has gone on a PR offensive, in order to spell it for the RUBES out there so they can understand what constitutes a violation and what does not. Everything seemed to be back on the up and up until today, the Washington Post ran an editorial that may further muddy the waters:

Would allowing the Bush tax cuts to expire as scheduled in 2012 violate this vow? We posed this question to Grover Norquist, its author and enforcer, and his answer was both surprising and encouraging: No.

In other words, according to Mr. Norquist’s interpretation of the Americans for Tax Reform pledge, lawmakers have the technical leeway to bring in as much as $4 trillion in new tax revenue — the cost of extending President George W. Bush’s tax cuts for another decade — without being accused of breaking their promise. “Not continuing a tax cut is not technically a tax increase,” Mr. Norquist told us. So it doesn’t violate the pledge? “We wouldn’t hold it that way,” he said.

Naturally, some DOPES out there got all worked up as The Hill reports, “Democrats had jumped on that quote, suggesting it was a sign that Norquist was willing to be more reasonable on taxes than many congressional Republicans.”

As you can see, the words “Norquist,” “reasonable,” and “taxes” are in extremely close proximity which indicates that these “Democrats” are what I’d like to call “COMPLETE IDIOTS.” Problem is, whomever grabs the loudest megaphone first in DC usually gets dibs on what the dish is so Americans for Tax Reform has AGAIN clarified how this Pledge thing works:

ATR opposes all tax increases on the American people. Any failure to extend or make permanent the tax cuts of 2001 and 2003, in whole or in part, would clearly increase taxes on the American people. In addition, the failure to extend the AMT patch would increase taxes. The outlines of the plans are deliberately hazy, but it appears that both Obama’s Simpson-Bowles commission proposal and the Gang-of-Six proposal dramatically increase taxes on the American people.

It is a violation of the Taxpayer Protection Pledge to trade temporary tax reductions for permanent tax hikes.

In other words, if you let the “Bush Tax Cuts” expire that’s fine but you just be sure replace them with “Obama Tax Cuts” to ensure there’s no trouble.

Out from under the anti-tax pledge [WaPo]
Grover Norquist tries to clarify Bush tax cut remarks [The Hill]
ATR Statement on Washington Post Editorial [ATR]

Comp Watch ’11: Deloitte’s New Structure Is Taking Shape

A couple of weeks ago, we heard that Deloitte was considering a similar compensation structure as PwC. This would result in Senior Associates making approximately 1.5x their starting salaries in three years, managers making 2x their starting salary and so on and so forth. At the time, it didn’t strike me as surprising that Deloitte would get all monkey-see-monkey-do on its employees simply because the Green Dot is a far more conservative firm than P. Dubs. While the structure at PwC was welcome with largely positive reviews, the Deloitte version was received less warmly.

Today, we have a little bit of an update for you – with slides! – on hure is progressing. From our tipster:

I’m surprised there was no article about this yet. Tuesday we all had a compensation call which went into great detail how raises and bonuses were handled. Here are some slides you might be interested in. It appears PwC scared them and they are copying. These numbers are still not official yet as they “are working out the numbers”…


Here’s a slide from the presentation on Deloitte’s total compensation earnings multiplier that our tipster sent over:

And here’s PwC’s:

So they’re pretty darn close, with Senior Associates doing slightly better at P. Dubs but Senior Managers faring slightly better at Deloitte, thus it ends up as a wash. Granted, the Deloitte slides only present information for AERS Advisory professionals (sorry audit and tax peeps) but it would seem odd if they opted to only change the structure for one group.

Other items worth noting include the 500 promotions for this year and the 3-5% bonus that accompanies the bump.

The pictures on the following pages show merit increases based on ranking (1 to 5 scale) for Consultants, Senior Consultants and AIP – Senior Consultants.


Presumably, in the bad years some high performers may see a paltry raise of around 4% but in the good years, it will push 16%, depending on metrics listed:


And even more impressive for Seniors, with highest performers receiving a merit increase of ~20%:


What’s interesting to note here is that Deloitte claims to have awarded bonuses to 95% of “eligible professionals.” So if I understand that correctly, 5% of those people ranked 3 or higher didn’t get a bonus. It may also get you a little weak in the knees if the AIP pool is already larger than last year’s “highest ever” pool:

Lots to digest and discuss here, so let it rip.

Accounting News Roundup: Big Tax Break or Big Spending?; Ernst & Young Partner Promotions in DC; Friend-on-Friend Fraud | 07.21.11

As debt talks intensify, Obama opens door to short-term deal to buy more time [WaPo]
The contentious budget talks that have dominated Washington for months intensified Wednesday, prompting President Obama to say he would accept a short-term hike in the debt ceiling if it gave lawmakers time to finalize a comprehensive deal. Obama had pledged to veto any short-term measure, but White House spokesman Jay Carney said Wednesday that the president could accept an extension of “a few days” if it allowed a long-term deficit-reduction and debt-ceiling deal to work its way throug>My Big Tax Break Looks Like Your Big Spending [Bloomberg]
There is plenty of spending to cut. For instance, we’ve got one government program that hands people money to buy houses that, in most cases, they would buy anyway. They get even more money if they buy a more expensive house. Over the next five years, that program alone will cost almost $500 billion. Another federal agency will spend more than $400 billion to reward people for making money by investing and earning capital gains and dividends rather than by going to work and taking their income in wages. I like investors and I participate in the market, but is this really the sort of activity that requires a $400 billion subsidy?

Fed planning for potential default [Reuters]
The Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s $14.3 trillion borrowing limit looms, a top Fed policymaker said on Wednesday. Charles Plosser, president of the Philadelphia Federal Reserve Bank, said the U.S. central bank has for the past few months been working closely with Treasury, ironing out what to do if the world’s biggest economy runs out of cash on August 2.

Cisco’s 6,500 Job Cuts Could Hurt Push for Offshore Tax Holiday [Bloomberg]
Cisco Systems Inc. (CSCO)’s plan to eliminate about 6,500 jobs worldwide is complicating the corporate lobbying campaign for a tax holiday that would allow multinational companies to return $1 trillion in offshore profits to the U.S. at a low tax rate. The San Jose, California-based company, the world’s largest networking-equipment maker, has been among the most vocal supporters of a repatriation holiday being considered in the U.S. Congress. Cisco chief executive John Chambers has said he wants to return as much as $30 billion in overseas profits to the U.S. The company could increase its headcount by 10 percent, depending on details of a repatriation bill, he said before the job-elimination announcement.

Federal auditors scold IRS for slow notification of security breaches [WaPo]
In a recent report, the Treasury Department Inspector General for Tax Administration reprimanded the Internal Revenue Service for failing to notify taxpayers in a timely way — if at all —when the tax agency inadvertently exposed their personal information. IRS records showed 4,081 inadvertent disclosures of taxpayers’ personal information in fiscal 2009 and fiscal 2010. The IRS sent letters to taxpayers whose privacy was violated 86 days after the fact in 20 percent of the cases auditors examined in a sample of incidents from July 2010 to February 2011.

3 Groups Denied Break By I.R.S. Are Named [NYT]
Three nonprofit advocacy groups that were denied tax exemption by the Internal Revenue Service were all units of Emerge America, an organization devoted to cultivating female political leaders for local, state and federal government. The I.R.S. denied tax exemption to the groups — Emerge Nevada, Emerge Maine and Emerge Massachusetts — because, the agency wrote in denial letters, they were set up specifically to cultivate Democratic candidates. Their Web sites ask for evidence that participants in their training programs are Democrats.

Twitter Poised to Close a Two-Stage $800M Funding, With Half Used to Cash Out Investors and Employees [All Things D]
In a move reminiscent of one done by Facebook in 2009, Twitter is close to completing an $800 million funding deal that will include a second part in which around $400 million of the total will be used to cash out current investors and also employees. According to several sources close to the situation, the complex transaction could be completed within two weeks. Along with basic funding needs, this is largely being done this way to give those with stakes in the San Francisco microblogging company an ability to monetize their privately held common stock and also to do this selling in a more organized — and legal — manner.

Ernst & Young’s Greater Washington Office Announces Leadership Promotions [E&Y]
Four new partners in the DC office. If your office has announced promotions, we want to know.

PwC US Appoints Robert W. McCutcheon as New Industrial Products Leader [PwC]
RWM is the Pittsburgh OMP and will continue in that role but now is also responsible for leading the group that services several industries including “aerospace & defense, chemicals, engineering & construction, industrial manufacturing, metals, transportation & logistics, and forest, paper and packaging.”

Friend-on-friend swindles increase as economy flounders: Prosecutors [NYP]
Don’t forget family members.

WFT Names New Chief Accounting Officer Who Will Hopefully Avoid Any More Giant Tax WTFs

Remember Weatherford International? That’s the oil services company that had a ton of material weakness around their tax accounting that led to $500 million error. This resulted in restatements, a humiliated CFO and the Chief Accounting Officer resigning “to pursue other opportunities.”


But now, four months later, everyone has moved on and the company has some new blood:

Weatherford International Ltd. […] announced today that John H. Briscoe has agreed to join the company as Vice President –Chief Accounting Officer. Mr. Briscoe will report to the company’s Chief Financial Officer.

Mr. Briscoe served as Vice President and Controller of Transocean Ltd. from October 2007 to present. He also fulfilled additional roles in internal audit, investor relations and field finance. Prior to joining Transocean in 2005, Mr. Briscoe served as Ferrellgas Inc.’s Vice President of Accounting and served in other senior roles during his eight years with the company. Mr. Briscoe also served as Controller for Latin America for Dresser Industries Inc. Mr. Briscoe started his career with seven years in public accounting beginning with the firm of KPMG and ending with Ernst & Young as an Audit Manager. Mr. Briscoe is a certified public accountant.

Yes, that Transocean.

At Least the Jerks in Your Family Won’t Impersonate an IRS Agent to Swindle You Out of $20k

All families have individuals who seem to rub everyone the wrong way. Whether it’s that deadbeat brother-in-law who seems to owe everyone money or the bratty grandmother that threatens to cut you out of the will if you get another tattoo, there’s always someone who nobody can seem to stand. Despite these and other proclivities of your grade-A dick relatives, they’ve got some work to do to top this guy:

A 48-year-old Hilo man is going to federal prison for 17 months for duping his cousin out of $19,250 in an elaborate swindle involving a fictitious Internal Revenue Service employee in Honolulu and fake correspondence from the IRS in California and Utah.

Hua told his cousin she was being audited by the IRS and that she could pay a lower auditing fee if she hired him to do the audit rather than have the IRS do it when he knew the IRS does not charge taxpayers to audit them, according to federal court records.

At the time, Hua offered professional accounting and tax services under the business name Tri-Y Enterprises.

To persuade his cousin to continue paying him for auditing services never performed, Hua sent his cousin threatening mail and email purportedly from the IRS in Fresno, Calif., and Ogden, Utah, and from a fictitious IRS employee in Honolulu, said Tracy Hino, assistant U.S. attorney.

Hua also had his wife and daughter sign documents stating that they too were auditors working on the cousin’s tax case, Hino said.

Go hug your bitchy grandma.

Hilo man sentenced in scheme to cheat cousin [HSA]

Happy Birthday to Us! Going Concern Enters the Terrible Twos

Yes, today happens to be the blogoversary/birthday/whatever of this here fine publication. Back on this date in 2009, I woke up unusually late on a Monday only to discover that the site was live. I somehow was able to pull myself together and bang out a few posts sans pants without anyone – including David Lat – noticing that I was officially late for my first day of work (not the first time) day since then we’ve managed to come up with enough content to distract/keep you occupied throughout the week.

What have we learned in the past year? Let’s take a quick look back.

Well, for starters an email at PwC Ireland got a little out of hand. Adrienne’s lack of a CPA has come up a few times. Ernst & Young got sued over that Lehman Brothers thing. KPMG got sued for being a boys club. Lots of partners at Deloitte are unhappy. We learned that Rothstein Kass is officially the coolest accounting firm. BDO pays snitches in caffeinated beverages. And we gave lots and lots and lots of career advice. (Jesus, that Dear Abby must have wanted to keel over.) There was also de-pantsing by an accounting professor and now an accounting student. That doesn’t cover everything, obviously – Grover Norquist and Susan Coffey obsessions, Adrienne tells EVERYONE what they’re doing wrong on Twitter, DWB’s scotch-fueled advice, etc.

UPDATE:
I shamefully forgot this:

It’s all been pretty fun and we have you, dear readers, to thank. We really appreciate every single one of you. Especially you, John Veihmeyer. If you don’t email us, Tweet us, FB us, we don’t hear about these funny, disturbing and sometimes pathetic stories. KEEP IT UP. Thanks again for your support!

But now that we’re 2, where do we go from here? We’ve already managed to go from crawling to toddling, learned a bunch of naughty words (okay, we knew those) and quit drooling on ourselves. Basically, as Grover is fond of saying, ONWARD!