Author: Caleb Newquist

Founding editor, Going Concern.

(UPDATE) Comp Watch ’11: Things Are Looking Up for KPMG Advisory

~ UPDATE: Email sent to audit professionals added to the end of the post.

How do variable increases “larger than last year for most of you and much larger for many” sound?

With the first half of FY2011 in the books, we want to provide you with an update on the firm’s and Advisory’s performance and share information about our plans for employee compensation.

We are pleased to report that the firm and Advisory are ahead of plan for the first half of the year. Advisory’s revenues have grown 18% compared to last year and our pipeline of opportunities stands at a record $1.5 billion, confirming the marketplace relevance of our services.

We have also successfully added more professionals to our team (over 800 new and ennovated high value services (including services around cloud and data analytics), acquired a strategic sourcing business (placing us No. 1 in that important piece of the market) and strengthened our training programs (through Advisory University and many targeted programs).This is great news, and a direct result of your contributions!

Further, we are confident that we can finish the year in a very strong position if we continue to work together with a sharp focus on the marketplace, our people, the profitability of our engagements (including expanding the work we offshore to KPMG Global Services), and the timely billing and collection of our receivables.

So what does this mean for compensation? As we have said in the past, our philosophy is that as the business does well, we will share those rewards with our people. And, assuming we stay on plan the remainder of the year, that’s exactly what we plan to do:

Variable Compensation and Salary Increases

Based on our strong results to date, variable compensation will be larger than last year for most of you and much larger for many. Further, we expect that approximately 80% of you will receive a variable compensation award in October. And if you are a client service associate or senior associate, variable compensation is in addition to any awards earned as part of the Above & Beyond program.

Market conditions are dynamic and will vary greatly across our many service disciplines within Advisory. Therefore the range of salary increases will also vary greatly by individual and skill set. We have increased the planned spend for salary increases as well, so increases in base salaries on average will also be better than last year. We know that rewarding and recognizing our people is critical to fostering a high-performance culture, so you can be sure that we will continue to meet our commitment to provide an attractive and competitive total compensation package that differentiates exceptional performers with superior rewards.

Accelerated Compensation Communication

To help provide you with more clarity on what you can expect in the way of compensation come October 1, in July, a leader will meet with you individually to provide you with a line of sight into what you can personally expect to receive regarding salary increase and variable compensation. (As in past years, employees promoted as of July 1, will receive a promotion bonus at that time that will be in addition to any salary increase or variable compensation effective October 1).

And we ask that each of you continue working as a team, providing the best service you can to your clients and colleagues, and helping us to drive outstanding business results. Remember, the better the business does, the better we all do.

Thanks for everything you’re doing to build KPMG’s reputation as the best firm to work with, and to contribute to our success!

Reactions are welcome at this time.

UDPATE: Henry Keizer lays it down for the audit side of the house and while rosy (nearly identical wording as noted in the comments), there’s no specific “larger” or “much larger” language which may be of concern:

With the first half of FY2011 in the books, I want to provide you with an update on the firm’s performance and share information about our plans for employee compensation.

I am pleased to report that the firm is ahead of plan for the year. This is great news, and a direct result of your contributions. And, while there is still a lot more work to do, we are confident that, working together, we can finish the year in a strong position. We have good traction in the marketplace and anticipate that the demand for our services and skills will continue to be strong.

So what does this mean for compensation? As we have said in the past, our philosophy is that as the business does well, we will share those rewards with our people. And, assuming we stay on plan the remainder of the year, this year’s compensation pool will be enhanced compared to last year.

We know that rewarding and recognizing our people is critical to fostering a high-performance culture, so you can be sure that we will continue to meet our commitment to provide an attractive and competitive total compensation package that differentiates exceptional performers with superior rewards.

And we ask that each of you continue working as a team, providing the best service you can to your clients and colleagues, and helping us to drive outstanding business results. Remember, the better the business does, the better we all do.

Thanks for everything you’re doing to build KPMG’s reputation as the best firm to work with, and to contribute to our success.

Tax people – anything to report?

Accounting News Roundup: Wells CEO Says CFO Departure Is ‘So Yesterday,’; Satyam Auditors Ordered Back to Jail; FASB, IASB Re-requests Feedback on Convergence Burden | 04.21.11

GE Posts Fourth Straight Profit Rise as Industrial Orders Gain [Bloomberg]
General Electric Co. (GE) posted a fourth straight quarter of profit growth, beating analysts’ estimates, as equipment orders increased, and boosted the dividend for the third time since July. First-quarter profit from continuing operations rose 58 percent to $3.58 billion, or 33 cents, excluding pension results, up from $2.26 billion, or 20 cents, a year earlier, GE said. That exceeded the average estimate of 28 cents a share from analysts surveyed by Bloomberg.

Regulators Serve Up Alphabet Soup [WSJ]
The financial overhaul of the 1930s first brought in a slew of acronyms now part of today’s financial fabric—FDIC, SEC, FHLB and FHA. But the acronyms created by the recent Dodd-Frank Act means anyone hoping to understand the biggest financial overhaul in almost 80 years will need a language tutor.

Wells’ Stumpf Mum on CFO Departure [TSC]
Wells Fargo […] CEO John Stumpf wouldn’t answer questions Wednesday on the departure of Howard Atkins, the bank’s former financial chief, preferring instead to focus on the bank’s dividend and buyback. “That is so yesterday. We have a terrific CFO; we are going forward and we are looking to the future,” said Stumpf in the bank’s conference call Wednesday.

Treasury pays IRS a backhanded compliment on its tax-season performance [WaPo]
“On the one hand, the IRS is to be commended for its sharpened focus on fraud interception and prevention,” said Inspector General J. Russell George. “On the other, its efforts to prevent improper credits still leave much to be desired, and customer service problems continue.”

Supreme Court cancels bail to former Satyam auditors [NDTV]
The Supreme Court has cancelled the bails granted to PricewaterhouseCoopers partner Subramani Gopalakrishnan and Satyam’s internal auditor V. S. Prabhakar Gupta, directing them to surrender by April 30. A bench comprising Justice P. Sathasivam and Justice B. S. Chauhan cancelled their bail and directed them to surrender within this period, failing which, the central investigative agency will take steps to arrest them.

Calif. court freezes assets of TV’s ‘tax lady’ [AP]
A California court froze the assets and appointed a receiver Wednesday to run the business operated by Roni Deutch, a nationally known tax lawyer who gained a measure of fame on late-night television commercials. Sacramento Superior Court Superior Court Judge Shelleyanne Chang ordered Deutch to appear in court June 10 for a hearing to decide if she should be fined and jailed for criminal contempt of court. She acted after the California attorney general said Deutch shredded documents and failed to promptly repay her clients in violation of a court order.

FASB, IASB Want Feedback on Convergence Burden, Timeline [JofA]
FASB and the International Accounting Standards Board (IASB) posted a survey online to collect views from users about the time and effort that will be involved in adopting several new standards and when those standards should be effective. The boards are seeking further input on these issues because, they said in a press release, a request for comments in a document released last October drew a “limited number of responses” from users and, for FASB, private entities.

Anyone Who Gives a Rat’s Behind About IFRS Needs to Mark July 7 on Their Calendars

‘Cause there’s gonna be a roundtable.

The Securities and Exchange Commission staff announced today that it will sponsor a roundtable in July to discuss benefits or challenges in potentially incorporating International Financial Reporting Standards (IFRS) into the financial reporting system for U.S. issuers.

The July 7 event will feature three panels representing investors, smaller public companies, and regulators. The panel discussions will focus on topics such as investor understanding of IFRS and the impact on smaller public companies and on the regulatory environment of incorporating IFRS.

“We must carefully consider and deliberate whether incorporating IFRS into our financial reporting system is in the best interest of U.S. investors and markets,” said SEC Chief Accountant James Kroeker. “This roundtable will provide an excellent opportunity for investors, preparers, and regulators to provide the SEC staff with valuable information that will help the Commission in its ongoing consideration of incorporating IFRS.”

See you there. If you manage to recover from your July 4th meat sweats, that is.

PwC Shifts Its Competitive Poaching Focus to Duff and Phelps

At least for today! As we’ve discussed, PwC has been on a bit of shopping spree when it comes to KPMG partners and principals. Today however, P. Dubs announced that it has picked off Dwight Grant of Duff and Phelps to join their Financial Engineering services group.

Mr Grant was DP’s Global Leader of Financial Engineering prior to joining PwC. His addition follows the firm’s pick up of Pedro Santos to lead the Financial Engineering group as well as Jeremy Fago, Timothy Davis and Matthew Tanner as principals. No word in the PwC press release where those chaps came from but if you’re in the know, we’d love to hear about it.

What Are the IASB and FASB Smoking?

[T]he tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not […].) Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them. [Re:Balance]

Public Accounting Exodus Watch 2011 (Poll)

Earlier I attempted to give a BDO senior manager some perspective on the how to deliver the news that he was jumping ship. Oddly enough, a friend of GC also sent us this message yesterday:

Since this ‘Tis the Season’ for attrition, it would be interesting to see a survey on who is looking for employment beyond their current employ.

So since we like to get a feel for such things, we’re putting on a little poll to see how many people are grabbing life preservers. Vote in the poll after the jump and discuss the particulars in the comments.

What Is the Most Difficult Sentence to Understand in the Tax Code?

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The IRC is probably the last thing many of you want to think about right now but, yes, I’m going there.

David Foster Wallace’s posthumous novel, “The Pale King“, is set in an IRS office in Peoria, Illinois and you’ll be shocked – SHOCKED! – to learn that the protagonist is fighting extreme boredom at his job. Wallace did extensive research prior to writing his final book including taking accounting classes at Illinois State University and carrying on “lively correspondence with tax lawyers and C.P.A.’s, peppering them with questions about the Tax Reform Act of 1986, compliance studies, I.R.S. office furniture, and an exotic tax shelter called ‘the Silver Butterfly,'” the Times reports.

One of the accountants Wallace corresponded with was Stephen Lacy who wrote this about Section 509(a):

“[L]egendary as the most difficult sentence to understand in the tax code,” adding: “I find that although I can never quite understand what it says, after I read it several times and concentrate, I can actually get into a kind of weird Zen-type meditation high! (Then again sometimes it provokes a profound anxiety attack.)”

“Legendary,” not only because its Mr Lacy’s drug of choice, but because Ronald Reagan quoted this passage back in June of 1986 when he set forth on his divine mission of reforming the tax code. A mission he ultimately achieved and thereby canonizing himself in the hearts and minds of many (can’t you picture the shrine in Grover Norquist’s house?). Anyhoo, here it is, in all its glory:

For purposes of Paragraph (3), an organization described in Paragraph (2) shall be deemed to include an organization described in Section 501(c) (4), (5), or (6) which would be described in Paragraph (2) if it were an organization described in Section 509(a)(3)

Not exactly Stieg Larsson is it? Anyway, if any portion of the code is still haunting your dreams and you feel as though it tops 509(a), you’re invited to exorcise it out now and your conscience will finally be clear.

David Foster Wallace and the Literary Tax Accountant [NYT]

BDO Senior Manager Wants to Know How Best to Say ‘I Quit’

Welcome to the High Holiday edition of Accounting Career Emergencies. In today’s edition, a senior manager at BDO is ready to give notice but can’t decide if it’s best to keep things professional or to go out with a verbal assault the likes of which George Costanza has never seen.

Are you working in the Twilight Zone? Need some good ideas for celebrating the end of busy season? Feeling jealous about the sexy success<l us at advice@goingconcern.com and we’ll get you over your accountants-in-love envy.

Back to kicking off The Public Accounting Attrition Tour of 2011:

Going Concern,

I am still knee deep in busy season, with many engagements still open and pushing their April 30th deadlines. There is no real end in sight, since May and June look equally as busy with Q’s, EBP’s, 9/30 year ends and other projects the Partners engage us for that further contribute to my maxed out PTO accrual. So naturally, as most people do this time of year, I have been looking for open positions searching for that golden opportunity to finally break free of the social, physical and health suppression known as public accounting. That being said, is it wrong to lay down at night and dream of what you would say when giving your notice?

I have played out hundreds of scenarios in my head saying everything from the absolute extreme to the overly conservative. That makes me think – what is the best way to “leave” a public accounting firm? During my 11 year career, I have seen all kinds of people leave in a ball of fire, rather than just fade away. Those people think that the firm will collapse without them, or their leaving will cause a mass exodus or significant change to the firm. No way. It never happens. So really, what is the point of telling the Partners (and HR in the exit conference), what you really feel in your heart?

Dear Dreaming of Quitting,

There’s nothing at all wrong with dreaming of the most epic march in ever. I assume you’re referring to something similar to this:

As you mention, people who go out with a furious speech that features wild hand gestures and name-calling are typically those who think they are indispensable or are somehow the catalyst to the collapse of their firm. You’re right to say that this is NEVER the case. A team or an office may go through a rough patch (mileage of rough patch may vary) but eventually things calm down and return to relative normalcy.

So to answer your second question – the best way to leave your firm is: quietly. That doesn’t mean you don’t tell your colleagues, friends or others that you’re leaving (most probably know that you’re looking to leave anyway) but it should be a drama-free encounter. You meet with the appropriate people, tell them that your last day will be X and that should be it. If they pry about why you’re leaving or attempt to convince you otherwise, you can respectfully decline or entertain their queries and/or begging. That’s up to you. Even if you’ve been used and abused throughout the time at your firm, would it really make you feel better to tell that a partner that the experience of working with them was akin to a circle of Dante’s Inferno that he dared not scribe?

As for the motive behind these overtly dramatic “I quit!” speeches, I get the feeling that those who feel compelled to give them think they will get some satisfaction out of telling someone exactly how they feel; that giving everyone who deserves a piece of their mind will somehow make everything negative that happened in the past worth it. If you feel like expressing some honesty about your experience, that’s perfectly okay but for crissakes, have some tact. If you simply feel justified to spew verbal excrement, that only makes you look like a lunatic. A very unprofessional lunatic.

Accounting News Roundup: Ex-Taylor Bean Chairman Found Guilty; Did Auditors Miss Fraud at Lloyds, RBS?; Tax Prep in the Classroom | 04.20.11

Ex-Taylor Bean Chairman Farkas Found Guilty on All 14 Counts in Fraud Case [Bloomberg]
Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp., was found guilty of 14 counts of conspiracy and bank, wire ann what prosecutors said was a $3 billion scheme involving fake mortgage assets. A federal jury in Alexandria, Virginia, yesterday returned the verdict after one day of deliberations. Farkas, who was free during the trial, was taken into custody. He faces a maximum sentence of 30 years on the conspiracy and bank-fraud charges and 20 years or more on the wire-fraud and securities-fraud counts when he’s sentenced on July 1.

Auditors ‘could have missed fraud’ at Lloyds and RBS [Accountancy Age]
Auditors might not have picked up on financial mismanagement at Lloyds and RBS, so great was the confusion surrounding the banks’ assets in 2008. So concluded the Public Accounts Committee, which today called it “alarming” that neither lender was able prove their assets were not linked to fraud or criminality when they entered the Treasury’s Asset Protection Scheme in January 2009.

Yahoo CFO Says ‘Investments Starting To Pay Off’ [Dow Jones]
Yahoo Inc.’s (YHOO) first quarter-results show that investments the Internet giant has been making are “starting to pay off,” Chief Financial Officer Tim Morse said Tuesday. In an interview with Dow Jones Newswires, Morse noted that Yahoo beat the midpoint of its revenue guidance and topped analysts’ earnings-per-share forecasts by 1 cent. He also noted that that number of users of Yahoo’s branded properties was up 15% over last year and the minutes they spent on the sites rose 17%.

Facebook Seeking Friends in Beltway [WSJ]
Facebook is still trying to find a path to Washington, where the company has only a fledgling lobbying operation, even though it finds its privacy policies under increasing scrutiny and is trying to navigate a politically sensitive expansion into China. In seven years, Facebook has risen from a tiny start-up to an Internet power with a potential market value estimated at more than $50 billion. Now an online forum with more than 600 million users, Facebook faces growing pressure from lawmakers and regulators concerned about the way it uses personal information shared by its users.

State launches probe into campaign to provide superhero capes to jobless [Orlando Sentinel]
Dubbed the “Cape-A-Bility Challenge,” a $73,000 public-relations campaign by Workforce Central Florida features a cartoon character named “Dr. Evil Unemployment” and includes handing out about 6,000 red superhero capes to jobless Central Floridians. The campaign, revealed Saturday in a report in the Orlando Sentinel, was met with derision by many unemployed who questioned spending more than $14,200 on capes and $2,300 on foam cutouts of “Dr. Evil Unemployment.” They said the campaign’s tone risked minimizing the severity of the region’s labor problems.


Subotnik: Why All Students in the Basic Tax Course Should Prepare a Return [TaxProf Blog]
Novel idea.

What Not to Say in a Job Interview [FINS]
Job interviews should not be therapy sessions.

‘Single, Fat Accountant’ Struggling with Royal Couple Envy

Once again, we call attention to troubles from across the Pond, courtesy of AccountingWEB UK.

This time, the Single Fat Accountant is dealing with his uncontrollable jealousy over Kate and Willy’s upcoming nuptials:

I would like to publicly admit that I am jealous of the about to be married Royal couple. I do not want to know anything about them. I would prefer if there a total media blackout on the whole wedding. This to my big disappointment will not happen. As the time is getting nearer for the big day, the media has gone frenzy over the upcoming nuptials.

I know I should be a decent human being and wish them all the very best for the future like most of the very class conscious Britain. l cannot lie and pretend to join in the well wishes. I know this does makes me a mean and a horrible person.

Isn’t saying disparaging things about the Royal punishable by death in Britain? Or something? Well, single fat accountant it’s cool because most of us here in the States (accountants or not) don’t give a flying rat’s ass about Kate and Willy. Are they a good-looking couple? Sure. Do they enjoy wealth and social status that most people would kill for? Obviously. Will their marriage crash and burn in an ugly affair that results in another Royal Family scandal that will result tabloid fodder for years to come? We give it a 50/50 shot. The point is – why are you jealous? It doesn’t make any sense. Are you not capable of not clicking on their pictures or stories with their names in the headline? You’re wasting your precious utilization, friend. Get back to your spreadsheets.

Can you guys help cheer our friend up? Tell him everything is cool despite his lack of bloodline, wealth and hot fiancée.

Latest Poll Suggests That Most People Think Paul Ryan’s Deficit Reduction Plan Is a Lousy Idea

[A McClatchy-Marist] poll reported that roughly two out of three registered voters — 64 percent — would be in favor of increasing taxes on annual income over $250,000. President Obama reiterated in his deficit-reduction speech last week that he favored allowing taxes to rise on families in that income level. Independents favored that plan of action at roughly the same percentage as the country at large, with more than eight in 10 Democrats also behind the idea. A majority of Republicans, 54 percent, opposed it. The poll was conducted both before and after Obama’s Wednesday speech, with support for higher taxes on wealthier Americans picking up afterward. Meanwhile, fully four in five registered voters oppose cutting Medicare and Medicaid. The House GOP’s fiscal 2012 budget, largely crafted by Rep. Paul Ryan (R-Wis.), makes fundamental long-term changes to both health entitlement programs, converting Medicaid into a block grant and turning Medicare into a type of voucher system. [The Hill, Earlier]

How Are You Celebrating the End of Busy Season?

I’ll tell you how I’m celebrating – continuing my successful string of years not celebrating. Adrienne? She’s experimenting with home remedies for a stomach flu. But never mind our problems, you guys have somehow survived the January to April stretch without going nuts, assaulting someone and successfully avoiding awkward sexual advances (the latter two sometimes happening at the same time). That means you deserve to celebrate; whether or not that’s on company dime is another question.


Back in the KPMG days, I attended a pretty good throw-down at the Central Park Boathouse for the Financial Services group but that was in the spring of 2008 when the Bear Stearns embers were still hot and everyone who worked on the Citi still thought they worked for a great client (that’s what I was told, anyway). In 2009, end of busy season soirees were a much more muted with individual team celebrations because the world had basically just ended.

Last spring it sounded like it was more of the same. Nothing too out of control and individual teams were left to celebrate how they saw fit. Of course with a successful fiscal 2010 and fiscal 2011 looking good, firms may be ready to jump into the ostentatious end of busy season blowout parties once again. Maybe your partner(s) is/are taking you to Peter Luger’s; maybe it’s an intimate evening at the his/her home where some entertainment will be provided (hopefully from inside the firm). Or maybe it will just a drinks and awkwardly dancing the night away. We can’t possibly know since we don’t get invited to such things (at least officially), so discuss your plans, send us your invites or come up with your own ideas about how to best celebrate getting your life back.