Author: Caleb Newquist

Founding editor, Going Concern.

Accounting News Roundup: Ireland Will Take That Money Now; Deloitte’s Role in the GM Soap Opera; SaaS Continues to Outpace On-site Vendors | 11.22.10

Ireland Is Second Euro Nation to Seek Aid as Banks Wobble [Bloomberg]
Ireland became the second euro country to seek a rescue as the cost of saving its banks threatened a rerun of the Greek debt crisis that destabilized the currency.

The euro erased gains and Irish bonds pared an early advance after Moody’s Investors Service said a “ multi-notch” downgrade in Ireland’s Aa2 credit rating was “most likely.” The prospect of January elections loomed as the Green Party said it would pull out of Prime Minister Brian Cowen’s coalition.

Deloitte, Delphi, and GM: Duped or Duplicitous? [<auditors.com/2010/11/21/deloitte-delphi-and-gm-duped-or-duplicitous/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+ReTheAuditors+(re:+The+Auditors)">RTA]
Francine McKenna takes a peak at underbelly of one part of the GM situation.

Authorities may be close to filing insider trader cases [Reuters]
Federal authorities may file a series of insider trading cases against hedge fund traders, consultants and Wall Street bankers within weeks, several lawyers familiar with the situation said.

Prosecutors and securities regulators are likely to file a number of cases targeting the $1.7 trillion hedge fund industry rather than a single spectacular case, said the lawyers, who have knowledge of the investigations but did not want to be identified since details have not been made public.

SaaS players still outperforming on-premise vendors [AccMan]
Dennis Howlett: “In the past it was possible to ignore or critique this kind of assessment on the grounds the SaaS vendors operate on a fraction of the revenue the on-premise vendors enjoy and are in growth mode. Therefore you would expect to see high growth percentage based on the total size of the market. That’s changing.”

Cultures Clash in Combination of Bank Regulators [FINS]
The bigger concern is bridging the gap in culture. Consumer protection advocates have criticized both agencies for failing to police financial institutions adequately during the crisis.

“[The merger] could exacerbate problems at the two agencies, but it won’t make them better,” said Travis Plunkett, legislative director at the Consumer Federation of America. “A severe house-cleaning from the top down, focused on changing the culture and improving regulatory oversight, is necessary.”

BAE to Face Accounting Charge as Prosecutors Test Plea Powers [Bloomberg]
BAE Systems Plc, Europe’s biggest defense company, will be charged with failing to keep proper records of payments at a London court tomorrow, testing U.K. fraud prosecutors’ ability to negotiate plea deals.

BAE will plead guilty to accounting irregularities regarding its business dealings in Tanzania and may pay 30 million pounds ($48 million) under a proposed settlement with the U.K. Serious Fraud Office, said Sam Jaffa, a spokesman for the SFO. BAE was under investigation in the U.K. since November 2004 for allegedly paying bribes to win deals in six countries including Tanzania and the Czech Republic.

In Pictures: 10 Highest State Income Tax Rates For 2011 [Forbes via TaxProf]
Damn you Hawaii, with your bait and switch tactics.


Google CFO Pichette Says Social Networking a Part of Strategy [Bloomberg]
The quest for world domination will be disguised as fun!

FASB, GASB Standards to Undergo New Review Process [JofA]
The Board of Trustees of the Financial Accounting Foundation (FAF), the oversight body for the two standard setters, announced a review process it described as independent of the standard-setting process of FASB and GASB. FAF Chairman John J. Brennan called it a “mechanism for obtaining ‘real world’ feedback and analysis” of standards.

You Realize We Will Be Without Wesley Snipes for Three Years, Don’t You?

Sure, it could be shortened for reasons that can’t currently be foreseen but this is a huge blow to the culture…oh, to hell with it.

Judge Terrell Hodges was fed up with this circus and dude is going to jail.

Wesley Snipes was ordered on Friday to start serving a three-year prison sentence for a felony tax conviction after a Florida judge rejected his bid for a new trial.

“The Defendant Snipes had a fair trial … The time has come for the judgment to be enforced,” U.S. District Judge Terrell Hodges said in his ruling.

McGladrey Gives Thanks with News of Bonuses, Extra Holidays and Babysitters

C.E. Andrews and Dave Scudder interrupted McGladrey employees regularly scheduled spreadsheets a short time ago to share all kinds of good news. For starters, Mickey G’s is letting all employees blow off December 23rd and 30th which is pretty nice. Secondly, concierge services will be available starting January 1st, as well as a new arran”http://www.sittercity.com/”>Sittercity for in-house care caregivers.

And yes, there are bonuses.

But not just the year-end bonuses, mind you. No, C to the E and Scuds heard your incessant bellyaching and in addition to the year-end pool they are implementing “a new program to provide real-time recognition and monetary rewards” for those of you that go above and beyond the call of duty.

[caption id="attachment_21691" align="alignright" width="105" caption="Scuds"][/caption]

Our tipster was pleasantly surprised and told us, “McGladrey matches PWC – well not quite but certainly more than expected.”

True, McG isn’t hosting Thanksgiving up in Minnesota Nice country to our knowledge but it seems like a nice little surprise from the punch and cake crowd.

With Thanksgiving just around the corner, we’d like to take time to reflect on the things we are thankful for this year. The last twelve months haven’t been easy, but we have made some important changes in our organization that will create a solid foundation for our future success. We are thankful to have made it through this time of transformation, and we are beginning to see early signs of new growth for our firms, which will be aided by our new brand, growth strategies and the improving economy.

We have only accomplished this because of your tremendous efforts, and we are grateful to lead such a dedicated group of people. Today we’re happy to share some of the things we plan to do to show our thanks to you and to help you experience our people promise.

A gift of time
We’ve asked a lot from you during the last year, and we are truly thankful for the time you’ve invested to make our firms and our clients successful. To show our gratitude, we are giving you two extra paid holidays on December 23 and 30 to relax and spend time with friends and family. If you have conflicting client obligations, you may consult with your work team leader to find alternate dates.

Support for your busy schedule
You have a lot on your plate at work and at home, and we’re pleased to offer two benefits to help offset some of the stress you might be feeling. Starting January 1, all offices will offer concierge services to help you complete a variety of errands and personal to-do’s. We also will provide access to Sittercity, a new client whose business offers a program that connects you to local in-home caregivers for your child, elder, pet or home. Look for more details and information from your regional leaders in the weeks ahead on how you can take advantage of these programs.

Recognition and rewards
We know that you’ve been wondering about the bonus pools for year end, and we want to confirm that we have planned for bonuses this year to reward eligible employees for exemplary performance in support of our firms and our clients. We’ll commit to a baseline funding level in dollars, and the pool will grow based on our year-end performance.

But you’ve told us that year-end rewards alone aren’t enough – you also want to be rewarded throughout the year for your important contributions. In January, we will be introducing a new program to provide real-time recognition and monetary rewards to those of you who go above and beyond to serve clients, develop colleagues and support our strategic objectives. It will be similar, but not identical, to our former SPOT bonus program that many of you may remember. You will be hearing more specific information about both of these plans from your region after the Thanksgiving holiday.

We are truly thankful to have you on our team, and we hope that these things help demonstrate our appreciation. They are just the beginning of more good things that will come as we continue to strengthen our business. We look forward to reconnecting with you via our quarterly webcast on December 16 to discuss the progress we’ve made so far. Watch for an invitation next week.

In the meantime, we hope you have a relaxing holiday and that you enjoy reconnecting to the people and things that are important to you.

Happy Thanksgiving!

Former Business Journalist Needs Help Becoming the Next Great Forensic Accountant

Welcome to the christ-is-it-next-Wednesday-yet edition of Accounting Career Couch. In today’s edition, a former business journalist is looking to get into forensic accounting. How on Earth can you do that?

Need help with your next career move? Want some advice on an awkward confrontation? Looking for a loophole in your firm’s dress code so you can show off your fantastic gams/guns? Email us at advice@goingconcern.com and we’ll recommend what to say/wear.

Back to Mikael Blomkvist:

I’m in my earr worked in accounting. I have a B.A. in liberal arts and am currently enrolled in a Masters in Accountancy program. I formerly worked 10+ years as a business journalist, during which I learned a fair amount of basic accounting and financial statement analysis. I especially enjoyed investigative business journalism, which led me to get a PI license and a CFE designation and work as a freelance fraud investigator for several years. But I quickly saw that I needed a CPA license and real-world accounting experience to command decent fees.

Once I get my M.Acc., I’d like to get a job in forensics at a public accounting or consulting firm and starting working toward the CPA. I know exactly what I want to do: forensics, and even more specifically, fraud investigations. I’d rather not toil in entry-level audit and try to worm my way into forensics if I can avoid it.

My questions are myriad. For starters, am I too old to do this? (Yes, I’m a married parent, have paid dues before, don’t mind paying them again as a career-changer.) Where should I apply? Would the Big 4 even be interested, or should I concentrate only on specialized/regional firms? Would I have more luck going the entrepreneurial/sole proprietor route than trying to get a firm to hire me? Will investigate for food. Anything helps, even a smile.

Dear Blomkvist,

Let us just start by saying two things as it relates to the age question: 1) it doesn’t mean shit and 2) it’s irrelevant at this point. Judging by your actions you’ve already made up your mind and you’re just looking for a little confirmation.

Now, then. As far as where you should apply – Big 4 is an option but not a great one. They have forensics practices obviously but getting your foot in the door can be tough as the groups are small and positions are hard to come by. That being said, it won’t hurt to get in touch with the experienced-hire recruiters at the major firms in your area to see if there are openings. You’re certainly a better candidate than someone internal that has no investigative experience and wants to get into forensics for the hell of it. A little pavement pounding could turn up a great opportunity.

That being said, it seems to make more sense to seek out opportunities at boutique or small firms in your city. You will likely get the opportunity to meet the owner(s)/partners of the practice who will probably value your experience as an investigative journalist. Someone like Tracy Coenen would be a good example of an expert that could take you under their wing and show you the ropes (assuming they need someone).

As far as starting hanging your own shingle, it’s an option but you’ll eat what you kill. Are you prepared to live that way? Is your family prepared to live that way? Conversations need to be had. You may be able to lend a hand to other forensics specialists to get your feet wet but it will be a tough sell to land your own clients for quite awhile.

You’ve got the investigator’s instinct and presumably the iron-clad balls that Sam Antar insists are a must and that cannot be taught. These intangibles are extremely valuable and should be a major selling point no matter what path you choose. Skål!

S Corporations are Entity of Choice; 68% of S Corps Misreport

A recent IRS study shows that S corporation return filings (Form 1120S) increased dramatically and continue to be the most prevalent type of corporation filing. For Tax Year 2006, almost 2/3rds of all corporations filed a Form 1120S. The total number of returns filed by S corporations for Tax Year 2006 increased to nearly 3.9 million, from nearly 3.2 million reported in Tax Year 2002 and 722,444 in 1985. In 2006, there were 6.7 million S corporation shareholders. S corporations became the most common corporate entity type in 1997.


According to IRS data, about 68% of S corporation returns filed for tax years 2003 and 2004 (the years data were available) misreported at least one item. About 80% of the time, misreporting provided a tax advantage to the corporation and/or shareholder. The most frequent errors involved deducting ineligible expenses. Even though a majority of S corporations used paid preparers, 71% of those that did were noncompliant.

Reasonable compensation still an issue for S corporations – The GAO report also focused attention on the loophole that allows shareholders to reduce payroll taxes by reducing wage compensation. The IRS admitted that their efforts to enforce the adequate compensation rules for S corporation shareholders have been limited. For fiscal years 2006 through 2008, the IRS examined less than half of one percent of S corporations who filed.

Misreporting of shareholder basis is also a common problem, permitting shareholders to claim excess losses averaging $21,600 per taxpayer based on IRS audits for the period 2006 to 2008.

(Note: The above information was excerpted from Vern Hoven’s manual used in CPE Link’s Federal Tax Update: Part 4 webcast.) Webcasts are scheduled November-January. In Part 4, you’ll get an update on all corporate changes, partnership changes, and IRS audit issues.

San Jose Mayor Simply ‘Excited’ That PwC Chose to Move into a Building That Was Vacant for Eight Years

Considering this hunk of metal and glass has been empty since before the Iraq War started, San Jose Mayor Chuck Reed could probably muster a little more enthusiasm than this:

San Jose Mayor Chuck Reed said Wednesday that he was “excited” that PwC was staying in San Jose.

Something along the lines of “OMG! OMG! OMG! OMG! PwC, we are so grateful that you saved this building from becoming overrun by cobwebs and rats plus, it won’t be the laughingstock of our skyline anymore!”

No, Mayor Reed kept things fairly tepid:

“It’s a big relief for me,” said Reed. “I was worried about a major tenant moving out of downtown.”

Plus, you know, having this eyesore remain empty for a few more years.

Accounting New Roundup: Chinese Clean-tech Firm Admits to Accounting Fraud; COSO Moves to Modernize Framework; Sachdeva’s ‘Remorse’ Is Funny | 11.19.10

Bernanke Takes Aim at China [WSJ]
Federal Reserve Chairman Ben Bernanke fired back amid criticism at home and abroad of the Fed’s easy-money policies, arguing that China and others are causing global problems by preventing their currencies from strengthening as their economies boom.

Rino Int’l admits to accounting fraud – auditors [Reuters]
Chinese clean-technology firm Rino International Corp (RINO.O) admitted to accounting malpractice, according to a letter from its auditors filed with U.S. securities regulators, a week after research firm Muddy Waters first made the allegations.

According to the letter, Rino’s Chief Executive Zou Dejunas said the company did not enter two of the six Rino customer contracts discussed in the Muddy Waters report, while a third was “explainable.”

When asked about the company’s other contracts, CEO Zou said “there might be problems with 20-40 percent of them,” according to the letter from auditors Frazer Frost LLP that was filed with the U.S. Securities and Exchange Commission.

KeyCorp Says Mooney to Be First Woman Chief Exeutive at a Top 20 U.S. Bank [Bloomberg]
KeyCorp, Ohio’s second-largest bank, said Beth Mooney will take over as chairman and chief executive officer when Henry L. Meyer retires in May, making her the first woman to lead one of the 20 biggest U.S. banks.

Mooney, 55, vice chairman of the bank and head of community banking, was named president and chief operating officer effective immediately, the Cleveland-based lender said yesterday in a statement. She was named a member of the board and takes over as CEO on May 1.

COSO Launches Project To Modernize 1992 Internal Control Framework [FEI Blog]
From Edith Orenstein, “the Committee of Sponsoring Organizations of the Treadway Commission (COSO) announced it has launched a project to moderize its landmark Internal Control-Integrated Framework.

The framework, first published in 1992, has been supplemented by various publications since that time, including publications geared toward small public companies, and on monitoring of internal controls.”


Reid, Senate Dems go hardball on taxes [OTM/The Hill]
After the election of course, “Reid will force a vote on extending tax cuts for families earning below $250,000 and individuals below $200,000 that would allow tax rates on the wealthy to expire. But it’s not clear whether that vote will be on a permanent or temporary extension because of a split in the Democratic caucus, a notable change since the election.”

Genuine remorse from Sachdeva? Laughable. [Fraud Files]
Tracy Coenen is not impressed with the judge’s reasoning behind Sue’s 11 year sentence, “How remorseful can she be when almost her entire 25 page sentencing memo is full of excuses for why she shouldn’t be held (as) responsible?”

GAO: Compliance Costs of ObamaCare’s 1099 Reporting Requirement Are Low [TaxProf Blog]
So any talk of the financial burden on small businesses is just political rhetoric? Get out!

GAO: SEC Basically Needs to Replace Their Entire Accounting System

“These material weaknesses are likely to continue to exist until the SEC’s accounting system is either significantly enhanced or replaced, key accounting activity in other systems is fully integrated with the accounting system at the transaction level, information security controls are significantly strengthened, and appropriate resources are dedicated to maintaining effective internal controls.”

~ From a report issued by the Government Accountability Office

Final Call: Going Concern Reader Survey (Fall 2010)

Look people – I did my best. I told TPTB that reminding you a third time to take our survey would risk irritating them to the point of many of you breaking out in hives. Alas, my warnings have gone unheeded.

I’ve been assured that this will be the last reminder as well as the final chance to win a $500 gift card. So, if you decide to humor us, take the survey and end up winning the prize, it will be worth it. As for the rest of you, well, you can’t win if you don’t participate.

Follow this link to take our survey. As always, your billable/free time is appreciated.

We now return to your regularly scheduled inflammatory nonsense.