“I think we got off to a good start yesterday. There are going to be ups and downs in this process but I’m confident that we’re going to be able to get it done.”
~ President Obama is making us nauseous.
Author: Caleb Newquist
Founding editor, Going Concern.
The House Will Have a Half-Ass Vote on Tax Cuts Tomorrow
Don’t get too excited, the vote will only be on the tax cuts for those of you earning less than $250k. The vote that really counts (for the people that may be able to afford Snooki!) is being slapped onto the extension of unemployment benefits.
The bulk of the tax cuts — for lower and middle-class incomes — will be considered in a separate vote on Thursday. Democrats have long sought to only renew tax breaks for households under $250,000 in income, but Republicans have insisted on an extension of current tax rates for everyone.
Right, then. So this is a political play by the Democrats to show everyone that they don’t suck as much as the election results would have you believe. Republicans, however, do not care for this maneuver. Rep. Dave Camp (MI) is especially annoyed and evokes small business in the process:
“This is disappointing and a sign of bad faith after the president agreed to bipartisan, bi-cameral talks. There will be bipartisan opposition to the Democrats’ push to raise taxes on small business,” Camp said.
Gotta say, it is a pretty shrewd move by the Democrats (where was this spunk in October?) but at least everyone will have to get off their ass tomorrow and do something. God forbid the Republican members of Congress actually vote on something during the lame duck session.
House Democrats set Thursday tax vote [Politico]
House GOP Balks at Middle-Class Tax Cut Vote Scheduled Thursday [Fox News]
Extending All the Tax Cuts Would Allow for Some Great Holiday Gift Ideas
For the wealthiest among us, anyway. Sure, Alan Grayson’s ideas were helpful but sometimes you need something extra special, you know?
IRS Commish Reminds Congress That If They Blow Off Tax Policy, We’ll Have a Giant Mess on Our Hands
There’s a small part of us that hopes the lame-o Congress just throws their hands up and lets all the outstanding tax policy issues expire, just to see what the fallout would be.
While we wish no harm to our practitioner friends like Joe Kristan, watching the pols in Congress squirm from the wrath of the American populace would be rather enjoyable.
Doug Shulman, on the other hand, does not share our impish impulses and wrote a letter to Congressional members on the Senate Finance and House Ways & Mean Committees, reminding them that if they let this one get away, his agency will have one hell of a mess on their hands.
Reuters has some excerpts:
“Of course, if legislation has not passed by the end of this year, our computers will have been programed incorrectly and we will need to delay filing for these individuals,” he said in a letter to the top lawmakers on the congressional committees charged with tax policy.
Realizing that the members might not quite understand what all this crazy-talk means, the Commish gave some details:
“It would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change,” Shulman wrote.
So essentially, re-doing a bunch of work. Nobody wants that. Luckily for everyone involved, Shulman appears to understand that while dysfunction is standard operating procedure on the Hill, most CPAs prefer providing above average client service.
Feds Not Amused by Area Man’s Crank Calls to Coast Guard, Filing of Tax Returns for Hookers
So. You’re 22 years old, you operate an Internet escort service out of your house and you’re feeling a little bored. What’s a man-child to do?
Well, making the assumption that you spend a lot of your spare time watching old Crank Yankers episodes, you might ring up the Coast Guard and tell them a shuttle at the Kennedy Space Center is about to be under attack.
Or if that doesn’t get the fired stoked in your plums, try calling them up again to say that your yacht is sinking off the coast of New York with ’10 souls’ on board.
Yeah! That’s the ticket:
Nicholas Barbati of Daytona Beach twice made the U.S. Coast Guard scramble to check out false information he gave them on separate occasions — including reports of a threat from the sea headed for a space shuttle about to take off from the Kennedy Space Center, federal officials said Tuesday.
Barbati, 22, also called the Coast Guard in Washington, D.C., to tell them his 32-foot yacht was sinking off the coast of New York, investigators said.
Oh. And about those escorts, “Barbati pleaded guilty to the two hoax cases in August, the U.S. Attorney’s Office said. Then, in October, Barbati pleaded guilty to filing false claims with the IRS. He filed income tax returns for prostitutes employed by his Internet escort service operating out of his house, investigators said.”
Now you may be thinking that Barbati was just a little mischievous and he just made some poor decisions. Let us dispel that notion from your head right now:
Barbati’s computer was seized and it showed Barbati had made 584 other harassing and hoax calls. Between May and June 2009, Barbati made “swatting” calls to law enforcement dispatch centers around the world so dispatchers could not identify where the calls came from, investigators said.
In one case, Barbati told dispatchers he was going to kill a baby if the police did not arrive soon and gave a fictitious address, the release said.
But back to the hookers for second – if you’re going to provide employer-prepared tax returns, the least you could do is prepare the them accurately. You don’t want the Better Business Bureau on your case.
Prank calls to Coast Guard, dispatch centers land man in federal prison [DBNJ]
Norwegian Businesses Take Bathroom Access Far More Serious Than Ernst & Young’s Long Island Office
You may remember way back in January when we told you about Ernst & Young’s Jericho office putting the clamps down on its water closets. The long/short of it was that the firm made them only accessible by key like some flithy gas station shithouse.
As bad as that is, some businesses in Norway are taking things a bit further:
A boss in Norway has ordered all female staff to wear red bracelets during their periods – to explain why they are using the toilet more often.
The astonishing demand was revealed in report by a workers’ union into ‘tyrannical’ toilet rules in Norwegian companies. The study claimed businesses were becoming obsessed with lost productivity due to employees spending too much time answering the call of nature. It found 66 per cent of managers made staff ask them for an electronic key card to gain access to the toilets so they could monitor breaks. Toilets in one in three companies were placed under video-surveillance, while other firms made staff sign a toilet ‘visitors book’, the report by the Parat union said. It added: ‘But the most extreme action was taken by one manager who made women having their period wear a red bracelet to justify more frequent trips to the loo. ‘Women quite justifiably feel humiliated by being tagged in this way, so that all their colleagues are aware of this intimate detail of their private life.’
Now we don’t know if the key system is still in place in Jericho (residents can let us know) but this should give you pause.
Boss orders female staff to wear red bracelets when they are on their periods [Telegraph via DB]
A Partner Hopeful Can’t Decide Between KPMG and a Mid-Tier Firm
Welcome to the light-the-menorah edition of Accounting Career Emergency. In today’s edition, a lucky co-ed who is convinced she wants a career in public accounting has internship offers from KPMG and GT and maybe another from BDO. Multiple choice study skills won’t really help her so she turned us for our sage advice.
Is your career on life support? Worried that the long hours during the upcoming busy season might finally cause you to crack? Does your family remind you of Arrested Development? Email us at advice@goingconcern.com and we’ll have no problem crushing your brother-in-law’s dreams of playing with the Blue Man Group.
Back to the multiple choice exercise:
I recently received an internship offer from both Grant Thornton and KPMG in Chicago. I more than likely will be getting an offer from BDO as well. Unlike many who go Big 4 then jump ship to industry, I want to make a long term career out of public accounting (i.e., hopefully make partner some day).
I liked the supposed “culture” and the people at all of the firms, but now I can’t decide which one I want to go with. I don’t know if going midsized will mean quicker promotions, and somewhat better hours (relatively speaking), or if the Big 4 prestige is even relevant long term within the public accounting field. Please help me make sense of this…
Dear Partner Hopeful,
Pardon us but we’ll briefly delve into semantics for a second – “midsized” isn’t really representative of GT or BDO (we’re not crazy about mid-tier either but we’re open to suggestions) as they both have vast international networks. It is also true that the Big 4 dwarf GT and BDO combined so a moniker for the non-Big 4 firms (because that also sucks) could be the most important debate to come out of your question. But that’s a discussion for another day.
Now, then. We’re impressed that you have your mind made up that you want a long-term career in public accounting. That was our initial aspirations as well and look how that turned out. All we’re saying is, don’t get ahead of yourself and the culture will wane, trust us.
As for the Big 4 vs. GT/BDO question – for starters, the promotion pace will be similar no matter where you go. Besides, do you really want to get to senior manager in 5-6 years just to sit there for 10 more before you make partner? Our guess is, nofuckingway.
Secondly, don’t ask about hours. They will be long no matter where you go. Get over it.
The most provocative part of your question is related to prestige. GT and BDO rank #5 and #6 in Vault’s latest ranking, so it’s not like you’re working for complete schlubs. Plus, Chicago, as you’re well aware, is where Grant Thornton and BDO are headquartered. Conventional wisdom may tell you that KPMG is a more prestigious firm regardless of location and that very well may be true. But if you’re working in the HQ city of GT or BDO, you’re likely to hobnob with some of the most high-ranking professionals within those two firms. Not taking anything away from KPMG Chicago, but you simply won’t get the same exposure to the firm’s national leadership as you would at Grant Thornton or BDO.
Bottom line is that all the firms are solid and if you’re sold on the people and culture, you’ll have no problem fitting in at any of them. But if you’re concerned with prestige and building your network, it’s worth considering the opportunity of getting exposure to the bigwigs at GT and BDO.
Accounting News Roundup: Mortgage-Interest Deduction on the Chopping Block?; KPMG Names Non-Exec Directors; House May Vote on Tax Cuts Tomorrow | 12.01.10
~ Happy Hanukkah to everyone celebrating!
Mortgage Tax Break in Crosshairs [WSJ]
The co-chairmen of the White House’s bipartisan deficit-reduction commission said Tuesday they would propose a significant paring of popular middle-class tax breaks, including the mortgage-interest deduction, and push for an increase in the Social Security retirement age.
The recommendations will be included in a final debt-cutting proposal from Democrat Erskine Bowles and Republican Alan Simpson to be unveiled Wednesday. The ideas are part of a broad and controversial proposal to tackle the U.S. government’s debt through a combinat and an overhaul of the tax code. The proposal would hold down the growth of the federal debt by at least $3.8 trillion by 2020, and perhaps more, the two said at a news conference. Messrs. Bowles and Simpson said their plan was preferable to a debt crisis like Europe’s that could ensue without changes to fiscal policy.
AccountingWEB announces 2011 accounting student scholarship program [AW]
Three scholarships will be awarded to students who are declared accounting majors based on the submission of an essay and the subsequent judging thereof. Funding is provided by AccountingWEB with the goal of encouraging accounting as a major and a career choice.
FCC chair announces net neutrality push without re-asserting role over broadband Internet [WaPo]
The chairman of the Federal Communications Commission plans to announce Wednesday a controversial proposal that would prohibit Internet providers from favoring or discriminating against any traffic that goes over their networks.
FCC Chairman Julius Genachowski would do so, however, without resorting to a more drastic step of changing the way the FCC regulates broadband providers that would have more clearly asserted the government’s authority over Internet access.
KPMG hires directors for new oversight body [FT]
Sir Steve Robson, Tom de Swaan and Alfred Tacke will serve as non-executive directors on an oversight body for the firm’s UK operations.
FASB, IASB Update Convergence Priority List [A&A Update/CW]
The Financial Accounting Standards Board and the International Accounting Standards Board said they are still on target to finish writing new accounting standards for financial instruments, revenue recognition, leases, comprehensive income, and fair value measurement by June 2011 or earlier. The IASB is also on target to align its disclosure requirements for derecognized assets and other off-balance-sheet risks with U.S. rules and to finish its updates for consolidations and insurance contracts by the same date.
The Perpetual Debt Machine As Explained By The TV Series “Good Times” [JDA]
Nothing like a 70s sitcom to explain the banking system.
House may vote on tax cuts Thursday [Reuters]
Key word is “may.”
Spreading the Corporate Holiday Cheer [WSJ]
Cupcakes go a long way.
Ernst & Young Rang the Closing Bell Today
We don’t recognize anyone but you’re invited to point any notables out.
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And you just know that somewhere, Dick Fuld is slobbing around in a old CU sweatshirt, muttering about backroom number-crunching dweebs that are still in business.
[via NYSE]
Some People Aren’t Convinced Nancy Pelosi Wants to Compromise on Tax Cuts
President Obama is darn sure that a deal will get made on the expiring tax cuts before the end of the year despite the ‘logjam’ between the two political parties.
He’s confident because hard-working families need it, the economy is fragile yada yada yada and now that Tim Geithner and OMB Director Jack Lew are on the case, this thing is a shoe-in.
While the next Speaker of the House, John Boehner, is not quite on the same page as the President, he’s pretty much in the same chapter:
“Republicans made the point that stopping all the looming tax hikes and cutting spending would, in fact, create jobs and get the economy moving again,” said Representative John Boehner, who will become Speaker of the House next year.
“We’re looking forward to the conversation with the White House over extending all of the current rates, and I remain optimistic,” he said.
Well, as close as to the two will likely get in public anyway. However, this a slightly more optimistic stance than what some people have for Nancy Pelosi, who would, presumably, rather give up her Armani suits than hand the wealthy a tax cut:
“There is some thought that the last thing that Nancy Pelosi wants to do on her way out of the Speaker’s office is to have Congress approve an extension for tax cuts for the wealthy,” said Brian Gardner, an analyst for investors at Keefe, Bruyette and Woods.
“She could muck things up a little bit.”
Well! This should be fun! Stay tuned.
(UPDATE 2) SEC Charges Deloitte Tax Partner with Insider Trading
~ Update includes clarification of partner’s employment status and statements from accused’s attorneys via MarketWatch.
~ Update at circa 7:20 pm ET includes statement from Deloitte
If you thought all this insider trading fun was just for hedge funds you would be sorely mistaken. Deloitte seems to have another case of a partner who can’t seem to control himself when he gets some insider info. Earlier this year, former Deloitte Vice Chairman Tom Fla > shelled out $1.1 million to settle charges with the SEC.
This time around, it’s still a family affair – husband, wife, wife’s sister and brother-in-law job – and it went overseas:
The Securities and Exchange Commission today charged a former Deloitte Tax LLP partner and his wife with repeatedly leaking confidential merger and acquisition information to family members overseas in a multi-million dollar insider trading scheme.
The SEC alleges that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte’s clients to Annabel’s sister and brother-in-law in London. After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan’s clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans. Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.
The UK Financial Services Authority (FSA) has announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm. Sanders’s tippees and clients made approximately $20 million in U.S. dollars by trading on the inside information.
So not a bad haul. The kicker is, Annabel was also employed at Deloitte, working in the London, San Jose and San Francisco offices. The McClellans provided information to the Sanders on several companies including Kronos, Inc., aQuantive, Inc. and Getty Images.
The SEC brass gave their standard scolding. First, Enforcement Chief, Robert Khuzami, “The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong.”
And San Fran Director Marc Fagel, “Deloitte and its clients entrusted Arnold McClellan with highly confidential information. Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple’s own benefit and their family’s enrichment.”
But the real story here is the second instance of insider trading charges against a Deloitte partner this year. The firm successfully sued Tom Flanagan back in January but you have to wonder if there isn’t some flaw with the firm’s internal oversight. Not long after the Flanagan suit, we reported on the 475 reprimands for internal noncompliance in 2009. Those reprimands did not mention insider trading specifically but over 200 of them were related to independence violations. Pattern? You can weigh in below.
Anyone with any knowledge on this story is invited to get in touch with us. as it is not clear if there has been any internal repercussions yet. Messages (including voicemail, carrier pigeon and morse code) left with Deloitte have not been returned (see statement below).
UPDATE: McClellan’s attorneys are not amused by the SEC’s little stunt:
Lawyers for Arnold McClellan denied charges Tuesday by the Securities and Exchange Commission that the former Deloitte Tax LLP partner was involved in a big insider trading scheme. “Arnold McClellan denies the SEC’s claims and will vigorously contest them,” Elliot Peters and Christopher Kearney of Keker & Van Nest LLP said in a statement on behalf of McClellan. “He did not trade on insider information, and there will be no evidence that he passed along any confidential information to anyone.” McClellan “had no financial incentive to commit the actions alleged,” the lawyers added. “He is a conscientious, law-abiding professional with a 23-year unblemished track record of client service at Deloitte to prove it. We will see the SEC in court.”
And just to clarify, McClellan is no longer with Deloitte, leaving the firm in June of this year. Deloitte spokesman Jonathan Gandal emailed us the firm statement (see below) still hasn’t returned our call (busy day, right?) but managed to give a statement to and was quoted by Reuters, saying that he was “shocked and saddened” by the allegations and “If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies.”
UPDATE 2: Here is the full statement from Deloitte:
“We are shocked and saddened by these allegations against our former tax partner and members of his family. If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies. Deloitte is committed to safeguarding non-public client information and has cooperated with the SEC throughout its investigation. The SEC does not allege any wrongdoing by Deloitte in this unfortunate matter.”
Your Future Accounting Jobs Belong to Sri Lanka
Ahhh, outsourcing. Nothing like American jobs going overseas to whip up fury among the masses. The latest example, via yesterday’s Times, is accounting jobs going to Sri Lanka.
As this tiny island nation staggers back from a bloody, decades-long civil war, one of its brightest business prospects was born from a surprising side effect of that conflict. Many Sri Lankans, for various reasons, studied accounting in such numbers during the war that this nation of about 20 million people now has an estimated 10,000 certified accountants.
An additional 30,000 students are currently enrolled in accounting programs, according to the Sri Lankan Institute of Chartered Accountants. While that ratio is lower than in developed economies like the United States, it is much greater than in Sri Lanka’s neighboring outsourcing giant, India.
But if you think these jobs are just 10-key jockeys and plugging digits into tax returns, you would be wrong, wrong, wrong:
Offices in Sri Lanka are doing financial work for some of the world’s biggest companies, including the international bank HSBC and the insurer Aviva. And it is not simply payroll and bookkeeping. The outsourced work includes derivatives pricing and risk management for money managers and hedge funds, stock research for investment banks and underwriting for insurance companies.
Many developing countries have “one particular competency that they do better than anyone else,” said Duminda Ariyasinghe, an executive director at Sri Lanka’s Board of Investment. “Financial accounting is that door opener for us.”
So all that you put in to knowing derivative accounting inside and out? Yeah, someone in Sri Lanka has a similar level of understanding and naturally, the labor there comes cheap. Extremely cheap:
In the United States, the median annual wage for accountants and auditors in May 2008 was $59,430, according to the Bureau of Labor Statistics. Sri Lankan workers in the accounting profession receive an average annual pay package of $5,900, according to a 2010 survey by the Chartered Institute of Management Accountants.
Wages in Sri Lanka for financial outsourcing are about one-third less than in neighboring India, and hiring educated employees is easier in Sri Lanka, according to executives who do business in both countries.
Yes, that’s a savings of 90%. No, there’s not much you can do about it. Except discuss below.