Author: Caleb Newquist

Founding editor, Going Concern.

Accounting News Roundup: PwC Getting Dropped?; Deloitte Gets Picked Up; KPMG HK Auditor Gets Cleared | 04.28.11

Here’s a Tax Guide for Nuts [WSJ]
New York is the latest state to roll out a set of odd distinctions between “food” items that are taxable (e.g. Hi-C) and non-taxable (Tang).

Most States Seen Raising Jobless Tax on Businesses [NYT]
As persistently high unemployment has drained the funds that are used to pay jobless benefits, more than two-thirds of the states expect to raise taxes on businesses this year to replenish them, according to a survey of labor agencies released Wednesday. Unemployment taxes remain low by historical standards: the survey, by the National Association of State Workforce Agencies, found that states have effectively cut the unemployment tax rate on businesses by 64 percent since the unemployment program began collecting taxes from employers in 1938.

Fiesta Bowl considers cutting ties to legal, accounting firms [TAR]
The Fiesta Bowl, which has made numerous changes to keep its status among college football’s elite post-season games, is considering whether to cut ties with its longtime legal counsel, Snell & Wilmer, and accountant PricewaterhouseCoopers. The bowl’s recently completed internal investigation into financial wrongdoing and potentially illegal behavior by employees raised questions about whether Snell & Wilmer’s lawyers and accountants at PricewaterhouseCoopers did enough to alert board members to improprieties.

Northern Oil and Gas, Inc. Announces Appointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm [NOG]
Northern Oil apparently wants to play with the big boys, as they ditch Mantyla McReynolds (a BDO alliance firm) for Deloitte.

What a Coinkydink! Overstock.com Buys Naming Rights Near Courthouse [Gary Weiss]
Honestly, you can’t make this up.

Priest Questioned Over Gambling Spree After Deloitte’s Internal Audit [inAudit]
A parish priest in Ottawa, Canada has decided to end his 14-year service to the Glebe church following an internal audit conducted by Deloitte LLP that revealed several controversies involving his gambling activities.

KPMG Auditor Cleared of Taking Bribe for Work on Hontex’s Hong Kong IPO [Bloomberg]
A KPMG senior manager was cleared by a Hong Kong judge of accepting a HK$300,000 ($38,601) bribe for his work on the listing prospectus of Chinese fabric maker Hontex International Holdings Co. The prosecution failed to prove beyond reasonable doubt that Leung Sze-chit, 33, intended to accept envelopes containing cash as a reward from Chan Chau-wan, a consultant hired by Hontex for its listing, in February 2010, District Court Judge Stephen Geiser said today.

Berkshire Hathaway Audit Committee Has Some Thoughts on This David Sokol Matter

Namely, he violated Berkshire’s code of business conduct and ethics and violated his duty of candor to the WB, Munger and the rest of the company.

BerkshireHathawayAuditCommitteeReportAPR2711

One of the Guys That Wrote the Mother of All Corporate Tax Textbooks Has Died

[caption id="attachment_29325" align="alignright" width="260" caption="Some interesting interpretations have occurred here."][/caption]

James Eustice, who co-authored Federal Income Taxation of Corporations and Shareholders with Boris Bittker, died yesterday at 77. He was a Gerald L. Wallace Professor of Taxation Emeritus at NYU and counsel at Cooley LLP.

This epic book is more appropriately referred to as a “treatise” but it probably served as your primary source of information for your corporate tax classes.

For anyone not familiar with B&E, it’s quite the impressive piece of work and would be an excellent weapon of choice in a tax nerd duel. I personally never assaulted anyone with my copy but it did come in handy when I had trouble sleeping in grad school.

Anyone else with fond memories of B&E are invited to share them.

Death of Jim Eustice [TaxProf Blog]

Tax Intern Wants the Lowdown on Opportunities After a Stint in Big 4

Welcome to everyone-whip-out-those-birth-certificates edition of Accounting Career Emergencies. In today’s edition, a Big 4 tax intern is thinking about life after public accounting, just in case, you know, he hates it. Are there real options out there or will it be a choice between being a Big 4 partner and opening a H&R Block in a strip mall?

Looking for career advice from a complete stranger who may mock you in the process? Is a co-worker questioning your intelligence? Thinking about taking your talents to an archrival? Email us at advice@goingconcern.com and we’ll help you with your Benedict Arnold impression.

Back in tax:

I’ve accepted an offer for an internship in tax this summer with a Big 4 firm, because I’ve always preferred tax to audit as far as a career within the firm. However, I am starting to have concerns over my potential career outside the firm should I decide that I hate public accounting. Unless I were to make partner, it is likely that I will have to look elsewhere to continue my career.

What are the career options outside the firm for someone working in tax at the manager/senior manager level? What can I do to make myself a more attractive candidate? Should I try to get into a specialty tax group? Would my career in tax give me the skills to open my own CPA firm down the road?

I apologize if these questions have been answered, I’ve spent the better part of two days trying to get answers to some of these questions. Feel free to direct me to the answer if this is the case.

Dear Tax Intern who seems to be getting ahead of themselves,

You’re having career concerns and you haven’t even been shown your cubicle? That makes me think that you might also be stressing over the Mayan calendar but since you mention making partner, I suspect you’re not that crazy (or this crazy).

Anyhoo, I’ve got good news – there are plenty of opportunities for you both inside and outside your Big 4 firm. Hopefully you’ll get exposure to various groups within your tax practice during your internship and that will get you thinking about what aspects of tax you enjoy best. If you like compliance – wow, are you in for a treat. You’ll probably start out there but at some point you may be able to jump into state and local (aka SALT), an international tax group or M&A. There are lots of options, which is why tax is such a great career path. Personally, I feel a speciality group can be great experience but you may limit yourself for opportunities outside the firm. That said, there is something to be said for being considered an “expert.”

As far as opportunities after your career in Big 4, you’ll be able to take any expertise you’ve obtained to clients in their own tax department. Remember GE’s department is the best tax law firm known to man and other corporations strive for similar tax savvy; you could fit in nicely. Similarly, if you’re confident you can go out on your own and start a tax boutique firm, you might be able to provide specialized services for a fraction of the cost of other firms. You’ll probably need a couple of colleagues to take the risk with you and some capital wouldn’t hurt but it could pay off in spades in the long-term.

Any tax mavens with some years behind them are invited to share their experiences. Now if you’ll excuse me, I have to get back to mocking birthers.

Accounting News Roundup: Navistar Sues Deloitte; Taxes Take Center Stage in Deficit Debate; Dealing with Your Jobless Friend | 04.27.11

House G.O.P. Members Face Voter Anger Over Budget [NYT]
After 10 days of trying to sell constituents on their plan to overhaul Medicare, House Republicans in multiple districts appear to be increasingly on the defensive, facing worried and angry questions from voters and a barrage of new attacks from Democrats and their allies. The proposed new approach to Medicare — a centerpiece of a budget that Republican leaders have hailed as a courageous effort to address the nation’s long-term fiscal problems — has been a constant topic at town-hall-style sessions and other public gatherings during a two-week Congressional recess that provided the first chance fo reaction to the plan.

Navistar Sues Its Former Auditor Deloitte & Touche [Bloomberg]
Navistar International Corp. (NAV), a maker of medium- and heavy-duty trucks, accused its former auditor Deloitte & Touche LLP of professional malpractice in a lawsuit seeking $500 million in damages. Navistar claimed shoddy work by Deloitte & Touche accountants from 2002 to 2005 forced the company to revise its financial statements, according to a 134-page complaint filed today in Illinois state court in Chicago. “Deloitte lied to Navistar and, on information and belief, to Deloitte’s other audit clients, as to the competency of its audit and accounting services,” the Warrenville, Illinois-based truckmaker alleged in its complaint.

H&R Block names former eBay exec as CEO [KCS]
William Cobb takes over for Alan Bennett.

Congress Wrangles With Taxman’s Take in U.S. Deficit Reduction Talks [Bloomberg]
Many Republicans, determined to prevent tax increases, say federal revenues shouldn’t exceed 18 or 19 percent of gross domestic product, the nation’s total output. Senate Republicans have offered a constitutional amendment that would cap the federal take below 17 percent of GDP. President Barack Obama, meanwhile, has proposed a budget that would push revenue to 20 percent of GDP by the end of the decade and announced a proposal April 13 that would raise that number even higher.

Litigation Piling Up At Ernst & Young [Forbes]
Keeping the lawyers in business.

Warner Says Gang of Six Debt Plan Weighs $3 in Cuts to $1 in Taxes Raised [Bloomberg]
While the emerging proposal by the so-called Gang of Six won’t increase tax rates, the Virginia Democrat said it will include scrapping some tax breaks and limiting others, such as shrinking to $500,000 from $1 million the size of mortgages on which interest payments can be written off or scaling back deductions for charitable giving.


Understanding Your Unemployed Friend [The Awl]
Stop saying “funemployment”; it’s really not.

Ex-Facebook CFO, Khosla VC Gideon Yu Goes To…The San Francisco 49ers [BI]
Yu’s résumé also includes a stint as YouTube’s CFO.

Yelp Plans To Go Public, Despite Booming Private Market [WSJ]
Yelp Inc., the consumer-reviews website, is declining to seek another round of financing and instead has its sights set on going public, the start-up’s chief executive officer, Jeremy Stoppelman, said in an interview. “An IPO is back on the table for us,” Mr. Stoppelman said. He declined to say exactly when the company would look to go public, but did say “the process hasn’t officially started yet.” The seven-year-old start-up is actively looking to hire a new chief financial officer with public company experience to guide it through the process, Mr. Stoppelman confirmed.

Some People Take Exception with the Idea That Investors Don’t Care About the Lack of Audit Firms

That said, it’s not as if investors can be everywhere at once. Audit committees could stand to get better at sharing information.

Liz Murrall, director of corporate governance and reporting at the Investment Management Association, strongly refutes this claim. “Investors do care”, she insisted, saying “no one wants to see an auditor in place for 50 years”.

However, Murrall warned that investors cannot engage with every company, and therefore cannot be expected to watch over audit committees’ shoulders to check every appointment. “Shareholders want the option of being involved, but don’t want consultation to be mandated – they don’t always have the time or resources.”

Transparency is the order of the day, according to the IMA. If audit committees increased disclosure about the tender process, shareholders would be more motivated and able to engage, boosting choice and competition in the market.

Investors ‘do care’ about audit competition [Accountancy Age]

McGladrey Suing Three ‘Rainmakers’ Who Defected to JH Cohn

That, according to a report in the Minneapolis/St. Paul Business Journal:

At risk are millions of dollars, the company’s reputation and the entire health care practice now led by a Minneapolis partner, according to a lawsuit recently filed by the accounting, consulting and tax firm against the three rainmakers who went to New York-based J.H. Cohn. Bloomington-based McGladrey and the former partners said they’d rather not discuss the dispute. Public records show that McGladrey is seeking a federal court order to keep the partners away from their clients

And unfortunately, that’s all we know. The MSTPBJ is behind a paywall (and my publisher is currently not springing for a membership) so we can’t really tell you much more than that. But we do love a good Benedict Arnold story, so we called around and are anxiously awaiting both firms to call us back. In the meantime, if you’re in the know get in touch or discuss below.

California Attorney General Not Amused By ‘Tax Lady’ Roni Deutch Destroying Records, Using Client Refunds to Pay Debts to a NASCAR Team (Allegedly)

If you’re an insomniac and adverse to softcore porn, you’ve probably seen Roni Deutch at some point, talking tax relief for those oppressed by the IRS to the point of it being a hate crime.

Last August, former California Attorney General and current Governor Jerry Brown sued Ron for a “heartless scheme,” of ripping off those people that needed her help settling disputes with the IRS. RD disputed the charges, continues to tout her expertise and is still issuing lame press releases that gives her some appearance of still being in the game.

As annoying as that probably is, the AG really got bent out of shape when it discovered that Deutch was destroying records and using client refunds to pay off some debts.

Harris’ office said Deutch has systematically destroyed documents for months and may have shredded up to 2.7 million pages of records.

The Attorney General said Deutch had been spending $3 million a year on advertising, mainly late at night on cable TV and that only one in 10 clients received any benefit from working with her firm.

The state also said Deutch was supposed to pay $435,000 in refunds by January, but instead released the money to other creditors, including family and friends, a NASCAR racing team and a casino.

Since these types of actions are typically frowned upon, current California AG Kamala Harris has asked a judge to find the Tax Lady to be in contempt of court and be given a free five-day stay at a local prison for each violation. Not sure how that math will work out but that could amount to a lot of NASCAR being watched on prison TV.

“Tax Lady” Roni Deutch has problems of her own [Reuters]

McGladrey & Pullen Names Joe Adams as New Managing Partner and CEO

Joe Adams is 30+ year vet of the firm and gets some high praise from the M&P Chairman of the Board, Jerry Bourassa, “His commitment to quality and McGladrey’s success make him an excellent choice for the Managing Partner position. I’m looking forward to working with him in his new role overseeing McGladrey & Pullen’s national strategy and business operations.”

Joe takes over for Dave Scudder who turned in his papers back in February. Joe was kind enough to give Dave a nod of appreciation in the press release, “I’m looking forward to these new responsibilities, and continuing the excellent work that Dave Scudder did in this role.” He gets the big chair on May 1st and we assume cake and punch will be served but an appearance by Natalie Gulbis has yet to be confirmed. [McGladrey]

Apparently Sponsors of the Louisiana Fair Tax Act Think You’re Stupid

They want to replace a mildly progressive tax with a decidedly regressive tax and make the argument about fairness? You can have an articulate argument about whether income taxes deter economic development. You can have an argument about whether such taxes lead to out migration of people and firms. Heck you can have a philosophical argument about whether society should be able to tax the fruit of your labor (or your trust fund). But you cannot argue with a straight face that replacing an income tax with a broad based sales tax (one that taxes necessities) is fair. That insults people’s intelligence. [David Brunori]

Underpants Gnome Accounting of the Day: CapitaLand Ltd.

Sometimes when your profits need a little boost, the best thing to do is change an accounting policy, amiright?

CapitaLand Ltd., a property developer in Singapore has pulled the double-entry sleight of hand to get a big boost in their first quarter profits:

The company […] said net profit for the three months ended March 31 was 101.5 million Singapore dollars (US$82.1 million), up from a restated S$29.8 million a year earlier, and was “underpinned by higher development profits and portfolio gain.” The company’s year-earlier net profit before the revision was S$115.4 million.

Okay, “higher development profits and portfolio gain” sounds a little vague so let’s see what else is helping these numbers:

The large increase also reflects a change in comparable figures for the year earlier due to an accounting policy change at the start of this year.

The new policy means overseas projects and local projects on a deferred payment scheme have to be fully completed before they are recognized.

This will result in “income recognition that is lumpy and back-ended, thus creating more volatility in profit recognition even though the underlying projects’ cashflows have not changed,” CapitaLand said in a statement.

Investors will likely view the results with caution as a result, analysts say.

“As CapitaLand has mentioned, this new policy gives rise to lumpy earnings that are not very meaningful, especially since over 50% of CapitaLand’s earnings are from overseas,” CIMB analyst Donald Chua said, adding other developers with large overseas market exposure will also be affected.

CapitaLand Net Surges on Accounting Change [WSJ]