Author: Caleb Newquist

Founding editor, Going Concern.

Kvetching About the Complexity of the Income Tax Is Nearly a Century-old Tradition

Joseph Thorndike writes over at Tax.com that bitching about the burdensome nature of income tax is as old-fashioned as plutocrats wearing top hats.

In 1915, Chicago lawyer Charles H. Hamill of Rosenthal & Hamill made headlines with some vigorous complaints about the new income tax, then less than two years old. The law, he said, was “the worst piece of legislative draftsmanship I have ever seen placed upon a statute book anywhere.” Indeed, it was very nearly incomprehensible:

“It is so complicated that it is utterly impossible to understand its meaning save by consulting a palmist.”

So as you can see, things haven’t really changed. To this day, whether you’re paying a lawyer, CPA or palm reader for your time, you walk out more confused than when you walked in and you definitely don’t feel like you got your money’s worth.

Think Taxes are Too Complicated? They Thought So in 1915, Too [Tax.com]

Accounting News Roundup: Ernst & Young Faces Resurrected Lawsuit; Taxpayer Advocate Wants Overhaul of Code; PwC Supports GLBT Youth | 04.15.11

Ernst & Young must face class action over Broadcom’s option backdating [LAT]
A lower-court judge had dismissed the case against Ernst & Young after concluding the plaintiffs hadn’t shown that the auditors knew that the value of Broadcom’s stock was probably inflated by the company’s manipulation of its financial statements. Thursday’s ruling by the U.S. 9th Circuit Court of Appeals in San Francisco reversed that dismissal and scolded Ernst & Young for not acting to stop the $2.2-billion backdating scheme.

Obama $1 Trillion Tax Proposal Slams Into Republican Wall [Bloomberg]
President Barack Obama’s call for raising taxes by focusing on spending in the tax code was immediately rejected by top Republicans, signaling that any effort to increase the government’s take from the economy would be difficult to move through Congress.

IRS Watchdog Seeks Overhaul Of Corporate, Individual Tax Code [Dow Jones]
National Taxpayer Advocate Nina Olson Wednesday told lawmakers the U.S. tax code is “a mess,” and in dire need of simplification, but any overhaul should rework rules for corporate and individual taxes at the same time. “I believe that fundamental tax reform must be made a priority,” Olson said in her written testimony to the House Small Business Committee. “However, in order to be effective and far-reaching, such fundamental tax reform should include both corporate tax reform and individual tax reform.”

BofA Q1 profit lower than expected; names new CFO [Reuters]
Bank of America Corp (BAC.N) posted an unexpectedly sharp decline in first-quarter profit, plagued by losses in the mortgage business, and the bank named a new chief financial officer.

PwC Says “It Gets Better” in Support of GLBT youth [PwC]
As far as work-life balance…well, that’s another question entirely.

Chinese Man Arrested in LA For Creating a Fake Army [JDA]
Wait, that’s a crime?

Zale says SEC not to recommend action against co [Reuters]
Zale Corp said the U.S. Securities and Exchange Commission does not intend to recommend action against the company following a probe into the accounting errors that prompted the jewelry retailer to restate results. Zale had restated results for 2008 and some quarters in 2009 due to accounting errors related to prepaid advertising and loss carryforwards. Loss carryforwards are used to cut tax liability by offsetting losses in a certain year against future profits. These carryforwards can be used in one of the seven years following a loss.

IRS Chief Lays Out Vision For Agency’s Future [NPR]
The Commish wants to fosters a more pleasant tax compliance experience.

President Obama Puts 1099 Reporting Requirement Down for the Dirt Nap

Today, I was pleased to take another step to relieve unnecessary burdens on small businesses by signing H.R. 4 into law. Small business owners are the engine of our economy and because Democrats and Republicans worked together, we can ensure they spend their time and resources creating jobs and growing their business, not filling out more paperwork. I look forward to continuing to work with Congress to improve the tax credit policy in this legislation and I am eager to work with anyone with ideas about how we can make health care better or more affordable. [WH]

CFOs: We’ll Start Hiring Just as Soon as We Hit Our Unreachable Revenue Goals

Sound good to everyone?

Chief financial officers at large North American companies polled by Deloitte LLP said it would take a 20% surge in revenue before they felt comfortable adding to their payrolls.

The quarterly survey released Thursday found that nearly half of respondents would seriously consider adding employees if revenues rose 20%, but few would be moved by a 5% increase. A 10% bump in revenue would only be a major hiring consideration for 11% of CFOs.

Worse yet, perhaps, actual growth isn’t expected to reach such heights: respondents estimate top line growth at North American companies will be just 8.2% this year. (This is, however, a rosier picture than the fourth quarter when respondents forecast 6.5% for the coming year.)

And don’t bother trying to bait them with tax reform, revisions to the healthcare reform bill or payroll tax incentives because they’re all non-starters.

CFOs: Revenue Surge Needed to Boost Hiring [WSJ]

IASB Chairman: We Don’t Issue Low-Quality Accounting Standards

Rule makers concluded this week that “we all could benefit from a few more months to develop these standards, some of which really go to the core issues of many companies,” said Leslie Seidman, chairman of FASB, in a podcast issued Thursday. Sir David Tweedie, chairman of the IASB, said rule makers still intend to finish their convergence work by year’s end. The delay, he said in the podcast, will “enable us to check whether our conclusions will last the test of time. … We would never release a standard before it is ready and ultimately it must be a high-quality standard or you just can’t issue it.” [WSJ]

Osbournes Pay Off Tax Lien, May Be on the Hunt for a New Accountant

It sounds like the Osbournes need to find themselves a new Mort Mort Feingold.

“I […] contacted my accountant who said they knew nothing about any lien. The lien has been paid. I do intend to find out how this lien happened without the knowledge of myself or my accountants. I hope none of this reflects negatively on mine and Ozzy’s moral character.” […] “Just because you’re paying someone doesn’t mean they’re doing the job correctly,” she wrote on Friday. Three days later she added, “You can’t rely on anyone but yourself. You have to be on top of your own business affairs. My fault … lesson learned.”

Ozzy Osbourne pays off U.S. tax debts [Reuters]

Did a PwC Auditor Work Herself to Death?

Pan Jie was a 25 year-old auditor in PwC’s Shanghai office, starting her career with the firm last October. She died of acute cerebral meningitis on April 10th, having “ignored the illness until a fever surged,” after catching the flu on March 31st. Reports have stated that Jie told a friend that “she had been working up to 18 hours a day and about 120 hours a week,” prior to her death.


A doctor quoted by one of the reports explained the cause:

Dr Wang Guisong, an expert in the neurosurgery department at Renji Hospital, said overwork can make people more vulnerable to infections. “Based on her symptoms and her low white blood cell count, it’s reasonable to conclude that overwork led to a weakened immune system, which makes her more vulnerable to infections,” Wang said. “When an infection worsens over time, people can develop acute cerebral meningitis.”

According to the story, PwC has denied that Ms Jie died from work-related fatigue but it’s hard to argue that her fatigue was caused by anything else. The firm is providing psychologists for employees, has sent a “team” to comfort Jie’s family and has even offered to assist with the cost of her funeral and this kind of outreach is admirable but the overarching culture within Big 4 firms is really what is of concern here.

Fatigue from overworking is not uncommon in the Big 4 life but when someone dies as a result of the fatigue, that’s will obviously get some attention (even if it’s just for a little bit). At some point it became acceptable for sleep – and health in general – to become of secondary importance when it comes to having a successful career. If you don’t believe me, look around you; everyone is exhausted and that’s part of the life inside a Big 4 firm. The pressures of performance in the name of client service are so great that people regularly come to work when they should be in bed or, in some cases, an emergency room. Of course there’s the macho contingent inside these firms that say “sleep is for the weak” and that’s the kind of attitude that perpetuates the culture of “getting the job done.” How is this acceptable? Not only can lack of sleep kill you, it doesn’t really do much for job performance. We’ve all seen people make big mistakes when they’re lacking sleep and yet no one considers the root cause. If you think skipping a few hours of sleep a night is worth to a few thousand dollars a year (at best) then you’ve got some seriously fucked up priorities.

I admit that people aren’t dropping left and right inside these firms due to lack of sleep but let’s quit pretending like working hours upon hours, putting your health at risk and coming into work looking like – pardon the expression – death warmed up is some kind of badge of honor.

Grant Thornton Welcomes LECG Employees to the Brotherhood

After yesterday’s news that LECG that was more or less pulling the plug, Grant Thornton finally put out a press release that they were acquiring a “significant portion” of the company’s business.

GT is taking on 270 employees in Atlanta, Chicago, New York, Philadelphia and Portland across all its service groups. Naturally, Stephen Chipman is thrilled to share this dynamic news, “We are pleased to welcome these outstanding individuals to Grant Thornton LLP,” SC said, “I am confident that they will fit in perfectly with our people — intellectually curious, talented individuals who want to make a difference with their clients, in their workplace and in their communities.”

Which was a perfect segue into this:

“As I have stated before, our goal is to be the leading audit, tax and advisory firm serving dynamic organizations in our chosen markets,” continued Chipman. “Dynamic companies are companies that are ambitious and growing, expanding internationally. They are dealing with critical events or transactions and are in need of our value-added, integrated service solutions. We will continue to explore additional strategic mergers and acquisitions as our balance sheet is healthy [Ed. note: care to share?] and we are in a position to attract similar talent.”

In other words, GT is still on the prowl for more people to join their party. Any interested parties need to come with dynamism in boatloads.

Accounting News Roundup: Debating the Audit Business Model; Tax Cheats in Prime Time; What Do I Have to Do to Put You in This Tax Reform Today? | 04.14.11

In Financial Crisis, No Prosecutions of Top Figures [NYT]
It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?

Obama Challenges Republicans With Deadline for Deficit Deal [Bloomberg]
President Barack Obama set a June deadline for a bipartisan deal to cut the federal deficit and offered a path to get there that was designed to contrast with a Republican proposal he called unfair to the elderly and overly generous to the wealthy. Obama’s plan, outlined in a speech yesterday at George Washington University, would cut $4 trillion in cumulative deficits within 12 years through a combination of spending reductions and tax increases that draws heavily on recommendations from the chairmen of his bipartisan fiscal commission.

McKenna to Debate GT’s Bailey [The Summa]
The annual conference of the Ohio Region of the American Accounting Association is hosting a debate between Francine McKenna (journalist/commentator on the audit industry) and Andy Bailey (Grant Thornton). It is scheduled for Friday, May 13, 2011, in Dublin (Columbus), Ohio.

The American Tax Cheat [CNBC]
Tonight at 9 pm!

Audit Committee Priorities Remain Risk, Compliance, and Technology [IIA/Norman Marks]
“Eating a good breakfast” is nowhere to be found.


President Obama, GOP still differ on tax reform details [The Hill]
If you can believe it.

Obama, Ryan, and the Parameters of the Budget Debate [TaxVox]
Howard Gleckman explains just how much talking needs to happen, “Imagine for a moment you walk into a dealership to buy the vehicle of your dreams. The salesman asks what you want to pay. You say $50. He counters with $50,000. The good news is you have begun a negotiation. The bad news is, you’ve got a lot of talking to do before you can drive that honey off the lot.”

Paul Ryan Practically Threw a Fit During President Obama’s Speech

Mr. Ryan sat in a front-row seat in the George Washington University auditorium Wednesday while Mr. Obama unveiled his plan to constrain growing levels of federal debt. Mr. Ryan grew visibly annoyed during the speech, shaking his head in disgust. He feverishly took notes, and when Mr. Obama finished he stood up and bolted from the auditorium. The only person apparently running faster towards the exit tugged on Mr. Ryan’s sleeve near the doorway and reached out to shake his hand. “Hi, Mr. Chairman, Gene Sperling,” Mr. Obama’s director of the National Economic Council said to Mr. Ryan in what appeared to be a conciliatory gesture. “Oh, I thought you were a reporter,” Mr. Ryan said, explaining why he didn’t immediately turn around when his name was called. [WSJ]

LECG Throws in the Towel; Won’t Continue to Meet Nasdaq Listing Standards

DoD will officially be April 21, 2011 according to the company’s press release. Obviously whomever’s left will be celebrating the high holiday the night before.

LECG Corporation (NASDAQ: XPRT) announced today that it is terminating its listing on the Nasdaq Global Market as of the close of business on April 21, 2011. The company has previously received notice from Nasdaq that it has failed to maintain a minimum bid price of $1 per share. In light of its current financial condition, the company does not anticipate the minimum bid price for its common stock returning to a level of excess of $1 per share. In addition, in light of its current financial condition and certain publicly-disclosed recent asset sales, the company does not anticipate being able to continue to meet other Nasdaq listing standards in the future. Further, in light of recent resignations, a majority of the members of the Company’s board of directors do not qualify as independent. Following the termination of its listing on Nasdaq, the company intends to terminate its public reporting obligations under the Exchange Act as soon as possible.

[via Francine McKenna via ZH]

Earlier coverage of LECG Implosion:
LECG Fire Sale Continues; San Fran Forensic Accounting Group Joins FTI Consulting
WeiserMazars Moves into Chicago as Part of Acquisition of LECG Units
LECG Selling Off Practice Groups to FTI, Grant Thornton, WeiserMazars