Author: Caleb Newquist

Founding editor, Going Concern.

This Accountant Underwent Counseling for an Addiction to Sausages

Accountants are not without their vices. Whether it be booze, sex, or DVRing every single HBO TV series, we all know someone who can’t quite break the spell of certain pleasures in life after they become addictive. Today in double-entry junkies, we meet David Harding. David loves sausages. He loves them so much that he has eaten at least one a day since the age of five. He loves them so much that he has undergone hypnosis to try and conquer his craving of salty pork links. He loves them so much that he was willing to do a live audition for the “Gluttony” role in Se7en.

Okay, I made that last part up but this accountant LOVES SAUSAGES:

A father-of-three has become the first person in Britain to undergo counselling after developing an unusual addiction to sausages. David Harding, 47, has paid out almost £2,000 in an attempt to beat his bizarre habit, which sees him eat up to 13 bangers per day.

Now if you think this is merely a man who lacks self-control, you’d be wrong. This is obsession, my friends:

He said: ‘I genuinely cannot bear the thought of living without sausages. ‘Drug addicts crave their medicine of choice, and it’s the same for me – except that my drug is a banger.’ Accountant David has eaten at least one sausage per day – in sandwiches, fry-ups or main meals – since the age of five. He spends up to £700 per year on bangers and has even bought a deep chest freezer to store the vast quantities of his favourite McWhinneys Irish pork sausages. David realised he could be an ‘addict’ last year when wife Susan decided to do ‘something different’ for dinner and failed to serve-up his usual fare. He said: ‘I went a bit mad at the thought of it. It threw me completely off-track. It was then that I realised something wasn’t quite right and sought professional help.’

As for these McWhinneys folks, they’re taking this in stride, much like a Philip Morris exec might:

McWhinney’s Sausages MD, Kevin McWhinney, said: ‘We are pleased that this gentleman likes our sausages, but wish him well in his quest to control his habit.’

Help me battle my SAUSAGE ADDICTION! Accountant forced to have counselling to get him off the bangers [Daily Mail via AwebUK]

Mary Schapiro Wants Accountants to Get Better at Their Jobs

Did you work hard this past busy season? Did you toil away for hours and hours to provide exemplary client service? Did you take one for the team when that creeper client contact wanted to dance at the end-of-the-year party? Great. Well done, good and faithful capital market servant. But guess who still isn’t satisfied? The SEC Chair, Mary Schapiro. Why? Well, it’s becuase you’re still not meeting investors expectations and the SEC is hearing about it. Everyone is demanding the best and you’re simply not cutting it right now.

“At the SEC, we have heard from investors that they are not as confident as they could be, and they have areas in which we all could expect more from accountants, from accounting standards, from regulators and from those who provide assurance through the audit process,” she said. “I believe that, when your customer asks for more, especially after the challenges of recent years, you need to listen.”

So maybe this is what KPMG is talking about when they say things are going to the next level?

SEC’s Schapiro Says Investors Expect More from Accountants [AT]

Former Senator Alan Simpson Is Having Trouble Expressing His Thoughts on Grover Norquist

“What kind of a nut is this guy?” former Wyoming Sen. Alan Simpson said of Norquist.

He told an audience at Wednesday’s Peter G. Peterson Foundation fiscal summit that Norquist was “some guy just wandering around the swamps taking a pledge from people when America was flush, and then pushing people like Orrin Hatch off the cliff as if he were a commie.” Simpson has said similar things to Norquist’s face. [The Hill]

(UPDATE, VIDEO) What Is the ‘Next Level’ Coming to KPMG?

From the mailbag:

Relatively ominous link on our internal homepage saying “get ready” “the next level is coming” as of 6.6.11.


We’ve confirmed this “next level” with several people and also that there is a video that Klynveldians are watching. We’d really like to see some screen shots of this, just to get some context. In the meantime, we encourage you to speculate about this “next level” and why you have to “get ready.” I’ll kick things off:

A) Tim Flynn’s retirement party is going to be epic.

B) Omaha Steaks announces a special “KPMG Package” that will drive the other, non-meaty firms crazy.

C) KPMG seeks revenge on PwC with their own competitive poaching efforts by offering the head of the mailroom at 300 Madison a 10% raise and a Phil Mickelson autographed hat.

D) Your ideas.

UPDATE:
Supposedly, this is the transcript to the video (still no screen shots, it’s called “Print Screen” people!). Our tipster wrote, “Interesting video that gives very little hint to what the ‘Next Level’ is other than lots of talk of a ‘high-performance’ culture. Maybe it has something to do with changing performance review structure a la PwC. The video definitely gives an ominous feeling as if the KPMGers in it are running out of time and people aren’t adapting to the changing market fast enough for their liking. All in all pretty strange vibes.”

Welcome to the Next Level – Video Transcript

[VARIOUS VOICES DELIVERING SHORT PHRASES]:

The market’s changed…

In order to compete in today’s world we have to keep up with change…

It’s a mindset… It’s a way of behaving…

It’s about a continuous journey…

Our ambition is greater than where we are today…

The attitude is contagious…

We’re not satisfied…

It’s really about taking it to that next level.

Keep us updated.

UPDATE 2:
Another tipster hears that it has something to do with the-next-level.com but “[I] don’t really know what they plan to do with it.” Poking around the site, it appears that it would be related to “Developing the Next Wave of Senior Leaders” but I’ve checked out for the week and don’t have the will to dig further right now.

UPDATE 3:
Well, the video finally made it’s way into my inbox and I’ve posted it on the next page for your viewing pleasure (I realize Klynveldians have seen it already).

After watching it a number of times I still can’t make heads or tails about what the “next level” will be but hopefully it’s does just to this movie trailer-esque video.

Accounting News Roundup: IRS Looking at Real Estate Gifts; KPMG’s ‘Greenest Building on the Wharf’; AICPA to ‘Recodify’ Code of Professional Conduct | 05.26.11

~ Sorry for the late start today, the Internet gods were not smiling on me this morning.

IRS Scrutinizes Gifts of Real Estate [WSJ]
The Internal Revenue Service has a low-profile but sweeping effort under way to use state land-transfer records for evidence of omissions in reporting gifts of real estate to family members. Beth Shapiro Kaufman, a partner in the private-client group at law firm Caplin & Drysdale in Washington, D.C., said many tax advisers may not be aware of the IRS effort. She added that as the agency gets records from more states, “we can expect additional examinations.”

Report: Philips looking at accounting in Mexico [AP]
A Dutch newspaper says Royal Philips Electronics NV is investigating possible accounting mistakes at its Mexican business in 2009. The Eindhovens Dagblad newspaper says it has papers from a KPMG accountant indicating the company’s earnings statements may have to be adjusted as a result. The report gave no indication of the size of the potential problem. Mexico accounts for a small percentage of the company’s sales. Philips spokesman Steve Klink said Wednesday he couldn’t comment on the accuracy of the report, but added that the company takes adherence to accounting and ethical rules seriously and would take appropriate action if warranted.

SEC Approves Rewards for Whistleblowers [WSJ]
The Securities and Exchange Commission approved in a 3-2 vote a plan to pay financial rewards to whistleblowers who report evidence of corporate wrongdoing merely to the agency, without also informing their employers. Business groups and others had argued that to earn such “bounties,” employees should have to first report their findings through internal company channels before going to the SEC.

KPMG – ‘the greenest building on the wharf’ [Guardian]
London’s rapidly expanding Canary Wharf may not be the most obvious place to look for innovative examples of sustainable building and design. Yet when KPMG selected 15, Canada Square as the site of its new UK headquarters, it had a very clear vision – to go beyond the demands of environmental and building legislation to create the greenest building on the wharf.

Improving the Code of Professional Conduct [JofA]
The AICPA’s Professional Ethics Executive Committee (PEEC) is undertaking a project to recodify the Institute’s ethics standards. The Ethics Codification Project’s primary focus is to improve the AICPA Code of Professional Conduct so that members and others can apply the rules and reach correct conclusions more easily. To achieve this, PEEC will restructure the Code into topical areas, edit the Code using consistent drafting and style conventions, and revise certain Code provisions (primarily independence) to reflect the “conceptual framework” approach. PEEC will expose the restructured and redrafted Code for public comment before considering it for final adoption.

Senate rejects Ryan budget [The Hill]
The Senate on Wednesday resoundingly rejected a budget sponsored by House Budget Committee Chairman Paul Ryan (R-Wis.) that calls for significant cuts to future Medicare benefits. The 40-57 vote came one day after Republicans suffered an upset defeat in a special election in upstate New York where Democrats made Medicare cuts the primary issue.

Deloitte Consolidating Pacific, Central Regions

Deloitte CEO elect Joe Echevarria has informed the partners that a little bit of restructuring will be going down when he takes the big chair next week. The Pacific Southwest and Northern Pacific regions will create a new West region while the Midwest and North Central regions will form a new Central region. The three remaining – Northeast, Mid-America, and Southeast – will remain as is.

Optimizing our regional structure

To: The partners, principals, and directors of Deloitte

When I shared my overall organizational structure with you in February, I noted that I would make the development of the right management model for the regions a priority. Just last week, the Board ratified the decision to move from seven regions to five for FY12 onwards.

We will combine Pacific Southwest with Northern Pacific to create a new West region. By combining Midwest and North Central region we will create a new Central Region. Northeast, Mid-America, and Southeast regions are unchanged.

This decision is the outcome of a comprehensive, strategic review led by Chet Wood, leader of Markets and Offerings. The review was inclusive, with input from many perspectives, including LCSPs, line partners from each FSS, OMPs and RMPs, FSS CEOs and other members of the U.S. Executive. We looked at the regions through the strategic lens of our Lead from the Front framework, to determine how, at this time, we can best align our organization model to the external marketplace.

We carefully considered the different roles regions and offices play for each of our businesses; while many of our non-regulated services are increasingly delivered nationally, regions are critical to the service delivery of our Audit, Tax and DGES practices. Our review also considered factors such as the impact on spans of control, leadership and development opportunities, community-building and sense of partnership, infrastructure costs and speed of implementation. We defined the regional model that will best drive client and business growth, improve our strategic positioning, and strengthen our performance.

The new structure is effective from the start of FY12, although some tactical aspects of implementation may take longer to complete. I have asked Anne Taylor and Gary Tabach to lead the succession process for the West RMP, and Mark Edmunds to lead the process for the Central RMP.

With this improvement comes new opportunity. It’s up to us to realize it and turn our new regional structure to a business advantage. In every region and in every market where we operate, we must continue to widen the gap between us and our competitors, strengthen our position, and ensure that we stay out ahead of change. That is how we will continue to lead from the front.

Joe Echevarria
U.S. Chief Executive Officer Elect
Deloitte LLP

Since we’re not intimately familiar with the hierarchy at Deloitte (e.g. “Regional Partner Leader of M&A Advisory Services” or “Area OMP Chief Leader of Regional Assurance”) these changes will probably mean some jockeying for spots amongst partners effected by the consolidation. And since some regional leaders within the firm (i.e. Talyor, Tabach and Edmunds) will be watching over this process, maybe there will be potential for some interesting developments.

Based on This Letter, You May Get the Impression That Deloitte Staff Were Lucky They Weren’t Taken Hostage Along with Their Workpapers

On Monday, we reported on Longtop Financial Technologies was the latest Chinese company to have their CFO quit, auditor resign and be accused of being a massive fraud. This particular story was interesting as one of the reasons cited by Deloitte for dumping LFT included “the unlawful detention of DTT’s audit files.” These accusations were described in much more detail in Deloitte’s letter to the company’s audit committee that was filed with the SEC and you may even conclude that the staff were thisclose to being hos

We italicized and bolded the best part.

The Audit Committee
Longtop Financial Technologies Limited
No. 61 Wanghai Road, Xiamen Software Park
Xiamen, Fujian Province
People’s Republic of China
Attention: Mr. Thomas Gurnee, Chairman of the Audit Committee

Dear Sirs,

Longtop Financial Technologies Limited (the “Company”) and together with its subsidiaries (the “Group”)
Audit for the Year Ended 31 March 2011

We hereby give you formal notice of our resignation as auditor of the Company.

Background and significant issues encountered by Deloitte Touche Tohmatsu CPA Ltd. (China) (“Deloitte”)

As part of the process for auditing the Company’s financial statements for the year ended 31 March 2011, we determined that, in regard to bank confirmations, it was appropriate to perform follow up visits to certain banks. These audit steps were recently performed and identified a number of very serious defects including: statements by bank staff that their bank had no record of certain transactions; confirmation replies previously received were said to be false; significant differences in deposit balances reported by the bank staff compared with the amounts identified in previously received confirmations (and in the books and records of the Group); and significant bank borrowings reported by bank staff not identified in previously received confirmations (and not recorded in the books and records of the Group).

In the light of this, a formal second round of bank confirmation was initiated on 17 May. Within hours however, as a result of intervention by the Company’s officials including the Chief Operating Officer, the confirmation process was stopped amid serious and troubling new developments including: calls to banks by the Company asserting that Deloitte was not their auditor; seizure by the Company’s staff of second round bank confirmation documentation on bank premises; threats to stop our staff leaving the Company premises unless they allowed the Company to retain our audit files then on the premises; and then seizure by the Company of certain of our working papers.

In that connection, we must insist that you promptly return our documents.

Then on 20 May the Chairman of the Company, Mr. Jia Xiao Gong called our Eastern Region Managing Partner, Mr. Paul Sin, and informed him in the course of their conversation that “there were fake revenue in the past so there were fake cash recorded on the books”. Mr. Jia did not answer when questioned as to the extent and duration of the discrepancies. When asked who was involved, Mr. Jia answered: “senior management”.

We bring these significant issues to your attention in the context of our responsibilities under Statement on Auditing Standards No. 99 “Consideration of Fraud in a Financial Statement Audit” issued by the American Institute of Certified Public Accountants.

Reasons for our resignation

The reasons for our resignation include: 1) the recently identified falsity of the Group’s financial records in relation to cash at bank and loan balances (and also now seemingly in the sales revenue); 2) the deliberate interference by the management in our audit process; and 3) the unlawful detention of our audit files. These recent developments undermine our ability to rely on the representations of the management which is an essential element of the audit process; hence our resignation.

Prior periods’ financial reports and our reports thereon

We have reached the conclusion that we are no longer able to place reliance on management representations in relation to prior period financial reports. Accordingly, we request that the Company take immediate steps to make the necessary 8-K filing to state that continuing reliance should no longer be placed on our audit reports on the previous financial statements and moreover that we decline to be associated with any of the Company’s financial communications during 2010 and 2011.

Our consent

We hereby consent to a copy of this letter being supplied to the SEC and the succeeding auditor to be appointed.

Section 10A of the Securities Exchange Act of 1934 (U.S.)

In our view, without providing any legal conclusion, the circumstances mentioned above could constitute illegal acts for purposes of Section 10A of the Securities Exchange Act of 1934. Accordingly, we remind the Board of its obligations under Section 10A of the Securities Exchange Act, including the notice requirements to the U.S. Securities and Exchange Commission. You may consider taking legal advice on this.

Yours faithfully,
/s/ Deloitte Touche Tohmatsu CPA Ltd.
c.c.: The Board of Directors

Doing It Wrong Twitter Case Study: The Sensitive CEO

Usually Adrienne handles these things but I seem to have started a beef, so here goes. Last Friday, I poked fun at BDO Global CEO Jeremy Newman, after he admitted that regulatory intervention in the UK would b up the audit market,” even though that’s the last thing he wants. “It is a shame it has taken so long and that it will require regulatory intervention,” he writes but then immediately qualifies the statement, “though it is not too late for my colleagues in the Big Four, and others, to act on a voluntary basis to create the environment necessary to allow real competition.”

This overt doublespeak caused me to open my post with this:

Perpetual fusspot and BDO Global CEO Jeremy Newman has not been shy about how unfair he thinks the dominance of the Big 4 is. The majority of his blog posts are tagged “Global Accounting” and several consist of bellyaching about Big 4 this and the Big 4 that. Of course, since the mainstream media has finally picked up on the idea that the concentration of auditors could be a bit of a problem […]

Newman wrote another blog post today starting with “I have never understood Twitter” but then did a Twitter search on himself, “not expecting to find anything” but he eventually landed on my blog post. He blockquoted the excerpt above (and linked!) and then wrote this:

Now call me sensitive, but I do not see myself as a “perpetual fusspot” or “bellyaching”- just someone raising a valid concern and one that has now been recognised by others, including the OFT but also the European Commission, MEPs, the UK’s House of Lords and many others, as being a potential issue. I also don’t think the dominance of the Big 4 is “unfair” – I think it is a risk and not in the public interest. And again this view is shared by others – including those who represent the public interest.

Clearly, Mr Sensitive had never graced this fine publication before but I read most of his blog posts and as I pointed out, lots of posts are tagged “Global Accounting” with titles such as “Big 4 bias – can we ever overcome it?,” “Financial Reporting and Auditing: A time for change?,” “There is a Credible Alternative,” and “Restrictive bank covenants keep the Big Four on top….”

Now maybe I’m way off base here but having so many posts (there are more) attributed to this topic, strikes me as someone who is excessively worried about something (i.e. “fussing“). I’m not suggesting he should start doing Mad Men recaps but there is consistent narrative. Plus, the word “fusspot” is funny. Furthermore, evoking “bias,” “can we overcome” and “credible alternative[s]” inherently speak to an unlevel playing field (i.e. “unfair“). Perhaps I’m too wrapped up in semantics but I think my point has been made.

On the bright side, I’m flattered that Mr Newman was offended enough to write a response of sorts (without naming names, unfortunately) and hopefully he finds some things on GC that are to his liking. Unfortunately he still doesn’t appear to be on Twitter, the catalyst to this whole exchange. I encourage JN to join the fun. Then he’ll be able to keep up on himself.

Ex-BDO CEO Denis Field Convicted in Tax Shelter Case

Wolf pack leader and former BDO honcho Denis Field was convicted on a variety of charges related to tax shelters that he and others provided to wealthy clients, according to several reports. This seems to mark the end to this particular case, as Denis’s colleagues all pleaded guilty back in 2009. Others convicted alongside Field included former Jenkens & Gilchrist partners Paul Daugerdas and Donna Guerin and David Parse, formerly of Deutsche Bank Alex.Brown.

New York Law Journal reports that during opening remarks, the prosecution quoted Mr Field as telling his fellow wolf packers that they would be “”swimming in a river of green” if they aggressively sold the tax shelter plans. His defense claimed that he was merely the “head showman and marketer” which sounds like a pretty lousy excuse but his lawyers stated that they will still file post-trial motions to have the verdict set aside. [WSJ, NYLJ]

Accounting News Roundup: China’s Accounting Problem; State Tax Revenue (Sorta) Makes a Comeback; Spring Mergers Are in the Air | 05.25.11

AIG Share Sale Raises $8.7 Billion for Treasury, Insurer [Bloomberg]
The Treasury sold 200 million shares yesterday at $29 each, compared with the closing price of $29.46 on the New York Stock Exchange. The government, which retains a majority stake, needs to sell shares at an average of about $28.73 to recover a $47.5 billion investment. AIG disposed of 100 million shares, raising $2.9 billion, according to a statement from the company.

Only China can tackle its own dodgy accounting [Reuters]
What about the hostage takers?

John Edwards: U.S. Green-Lights Prosecution for Alleged Campaign Law Violations Tied to Affair Cover-Up [ABC]
A source close to the case said Edwards is aware that the government intends to seek an indictment and that the former senator from North Carolina is now considering his limited options.

State Tax Revenue Increases by 9.1% [WSJ]
The revenue gains, which were driven by a 12.4% jump in personal income taxes, reflect the improving economy as well as tax increases passed during the recession. Sales taxes grew 5.6% while corporation income taxes, which are volatile and make up only a small portion of states’ tax collections, grew 6.9% in the quarter.

Resume Debate: Word v. PDF [FINS]
Hey, it matters.

RubinBrown joins forces with Bondi & Co. accounting firm of Denver [KCBJ]
RubinBrown LLP will merge with Bondi & Co. LLC on June 1 in a move designed to put the combined company among the nation’s 50 largest accounting firms. RubinBrown Chairman James Castellano said the deal will boost the firm’s annual revenue from $54 million to $65 million. Bondi partners were given a partnership stake in RubinBrown, but financial terms were not disclosed. The Bondi name will disappear.

LarsonAllen to Merge in Raymon Pielech Zexter [AT]
“RPZ has built a strong tax practice over the years, and we’re very proud of that,” RPZ managing shareholder Jeff Raymon said in a statement. “But in today’s business and financial market, we need to offer our clients more to help them succeed and stay competitive. Joining with LarsonAllen will give us the capacity to serve the broader spectrum of their financial and advisory needs almost immediately.”

Huguette Clark, the reclusive copper heiress, dies at 104 [MSNBC]
“IRV1040” is lurking.

Don’t Worry, There’s Still Plenty of Accounting Fraud Out There

In what might be a lagging indicator of recession-spawned misdeeds, the percentage of reported corporate frauds compared with all other reported incidents increased to 20.3% in the first quarter of 2011, a rise of more than 60 basis points from the previous quarter, according to data from 1,000 organizations worldwide. Of the 30,000 ethics- and compliance-related reports from people at those organizations in the first quarter, more than 6,100 concerned accounting or auditing irregularities, embezzlement, kickbacks, and other forms of fraud. [CFO]