Author: Caleb Newquist

Founding editor, Going Concern.

Remember the $3 Million in Overstock Shares Patrick Byrne Sold? Sam Antar Does

Last we heard from Patrick Byrne, the Overstock.com CEO and Farmville enthusiast, he had just disposed of 140,000 shares of OSTK via High Plains Investments, LLC, an entity 100% owned by PB. This had a few people scratching their heads, including us.

At the time, we wondered why Patsy would need to dump the shares, especially after all the excitement the company generated by turning their first profit ever in 2009 and a profitable Q1. We were hoping that the KPMG engagement team – that was doing such a bang-up job – would get some new Segways to cruise SLC but pesky independence rules probably got in the way of that.


Regardless, Q2 wasn’t expected to be a showstopper but when asked, Patsy wasn’t worried, telling Investor’s Business Daily, “Given that in 2009 we had close to $40 million of free cash flow (and $8 million net income), I think we should just continue building the intrinsic value of the business right now.”

Well! The Company reported its Q2 earnings after the close yesterday and, um, they missed the numbers badly. The $0.02/share loss expected by analysts was tripled with a loss of $0.06/share. As you might expect, the shares are taking a beating and Byrne nemesis Sam Antar finds this just a little bit fishy:

[N]ine days after Q2 2010 ended, Byrne led investors to believe that Overstock.com was going to break even in that quarter by citing previous year’s free cash flow numbers. However, Byrne did not mention that Overstock.com’s free cash flow for the six months ended June 30, 2010 was negative $54.8 million compared to negative $35.8 million in the previous year’s comparable perid [sic] or about $19 million lower.

So, there’s that. OH! And the $3 million in shares. Don’t forget that.

Overstock.com CEO Patrick Dumped Stock Ahead of Bad Earnings Report and Misled Investors About Earnings [White Collar Fraud]

Wonky Accounting Insight in 140 Characters or Less: The FASB Is Now on Twitter

Technically it’s the Financial Accounting Foundation that has the handle: @FAFNorwalk and it also includes anything the GASB but really the FASB is who we expect to go on the offensive here.


They’ll be able to take on the haters with pithy commentary, give us the latest on their (less) ambitious convergence efforts and maybe, if we’re really, really, really lucky Bob Herz will spin off his own version of @CrankyKaplan. @DisturbedHerz, perhaps?

We have hope.

Fasb Twitter Pr

While They Were at It, The PCAOB Thought They Might Chime in on Auditors’ Babysitting Skills

As we mentioned late yesterday, the PCAOB has been working hard these days. Late nights, weekends, ordering in and whathaveyou. Adrienne told you about the new eight auditing standards that you’re all expected to have memorized by Labor Day, and we wrapped up with Dan Goelzer snagging QOTD for the Board’s move towards open enforcement proceedings. This move will, presumably, be used in order to shame the pants off of those of you that dare to break the rules.

But the Board had one more thing to serve up yesterday and that was to put it out there that they don’t think too highly of the job auditors are doing supervising the worker bees:

“Through its inspections and investigations, the PCAOB has observed that supervision processes within firms are frequently not as robust as they should be, and that supervisory responsibilities are often not as clearly assigned as they should be,” said PCAOB Acting Chairman Daniel L. Goelzer. “Today’s Release seeks to highlight the Board’s views on the scope for using the authority provided in the Act to address those problems.”

For an industry that depends so heavily on a hierarchal structure, this does not bode well. There are several possible scenarios that led the PCAOB to jump in with their thoughts, including but not limited to:

1. Dozens of audit engagements of publicly traded companies have aloof partners that pop in once or twice a week, observe a handful of staff people feverishly ticking and tying, only to assume everything appears a-okay.

2. The PCAOB has incredible “luck” picking the biggest shitshow engagements.

3. The PCAOB is just blowing the shortage of experienced SAs out of the water.

4. Inspectors don’t buy the “we got this” story from the A1 and A2 running an accelerated filer engagement.

If you’re on one of these free-for-all audits, for crying out loud, get in touch. We want details.

PCAOB Issues Release on Failure to Supervise [PCAOB]

Ernst & Young Striving for Fewer “Cookie Cutter” Engagement Teams

E&Y’s annual intern conference invaded Orlando yesterday and the ‘Berg had Director of Campus Recruiting, Dan Black on to discuss Gen Y and why they are pre-tay, pret-tay, pret-tay important to the future of the firm.


Despite their technology savviness, it appears that Gen Y is still relying on rock-paper-scissors as a key decision-making tool. Apparently, darts and jigsaw puzzles are important too.

Oh, and the time you put in as a line cook at Applebees’s in college really doesn’t translate into anything useful so don’t be too concerned about that.

Accounting News Roundup: Signs That You Should Quit Your Job; District Court Issues Order in Wesley Snipes Tax Case; LarsonAllen Moves Into the Northwest | 08.06.10

BP Completes Cementing Macondo Oil Well From Top [Bloomberg]
“BP Plc completed a cement plug at the top of its Macondo well in the Gulf of Mexico, sealing off the source of millions of gallons of oil spewed into the sea after a drilling rig exploded in April.

The procedure completes the so-called t stage for BP is to finish a relief well to inject cement at the bottom and ensure there’s no leakage inside the 13,000-foot-long (3,962 meters) well bore beneath the seabed, National Incident Commander Thad Allen said yesterday.”

Ten Signs It’s Time to Leave Your Job: The Finance Edition [FINS]
Check yourself for some of these symptoms: “You’ve been holding back from voicing your grievances.”; “You have no clue where the company is headed.”; “You start to believe you can’t do better.”

And that’s just in the first five listed.

Altus completes PricewaterhouseCoopers deal [Bloomberg BusinessWeek]
PwC sells their real estate appraisal management for, what we can only assume to be, a decent chunk of change.

H&R, Jackson Hewitt shares fall on new IRS rule [Reuters]
“Shares of top two U.S. tax preparers H&R Block Inc (HRB.N) and Jackson Hewitt Tax Service Inc (JTX.N) fell Thursday on the Internal Revenue Service’s decision to eliminate debt indicator for tax-refund loans.

On Thursday, the IRS said starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with ‘debt indicator,’ which is used to facilitate refund anticipation loans (RALs).”


PKF Pacific Hawaii completes purchase of Grant Thornton Honolulu office [Pacific Business News]
Name goes official on Monday. Here’s our original report from back in May.

Two UHY LLP Partners Recently Named to Prominent Standard-Setting Implementation Groups [Market Wire]
“The national CPA firm of UHY LLP announced today the recent appointment of Houston-based partner Ana Denena to the International Accounting Standards Board’s (IASB) Small and Medium-sized Entities Implementation Group. In a separate appointment, the firm announced that Maryland-based partner Jennine Anderson was named to the Financial Accounting Standards Board’s (FASB) resource group on non-profit entities.”

PCAOB Adopts New Risk Assess. Stds; Issues Release on Failure to Supervise [FEI Financial Reporting Blog]
As we mentioned yesterday, the PCAOB has been busy. Francine McKenna guest-blogged over at FEI and gives the rundown.

Fannie Quarterly Loss Is Smallest Since 2007 [WSJ]
FTW? “Fannie Mae posted a $1.2 billion net loss for the second quarter, the smallest loss in three years, amid signs that the massive wave of souring loans that brought down the mortgage-finance giant may be easing. But Fannie still asked the U.S. government for an additional $1.5 billion.”

District Court Issues Order in Snipes Case [TaxProf Blog]
Just when you thought it was over.

If you’re not getting cloud computing you’re a loser [AccMan]
That is, you’ve got almost nothing to lose by going for it.

Midwest accounting firm buying LeMaster Daniels [Spokesman-Review]
LarsonAllen brings its business to the northwest by purchasing Spokane-based LeMaster Daniels.

Deloitte leadership race reduced to two hopefuls [Accountancy Age]
“he contest to replace John Connolly as leader of Deloitte in the UK will involve just two members of the firm’s board.

The contenders vieing for the top job are Martin Eadon, head of audit, and David Sproul, head of tax. Sproul joined Deloitte when the firm acquired Andersen in the UK on the back of the Enron crisis

Both candidates gave presentations at the firm’s partner conference on 6 July but no further campaigning is expected.”

Apparently the ‘Wildly Inaccurate’ Accounting at Scott Rothstein’s Law Firm Didn’t Impress Some Miami CPAs

Unless you were born blind and deaf, you may have noticed that South Florida has its share of shady characters. We all know that Berns Madoff frequented the area. Plus there’s the obsessively dapper Lew Freeman, who was Miami’s go-to forensic accountant until he thought he’d just keep his client’s money.

Another model citizen/criminal in FLA is Scott Rothstein. His Ponzi Scheme managed to bring in just over $1 billion and he got 50 years for his trouble. But now the fallout from Rothstein’s little stunt is now raining hell on Miami accounting firm Berenfeld Spritzer Schechter & Sheer.


The trustee overseeing the bankruptcy of Rothstein Rosenfeldt Adler has accused Berenfeld, et al. of funneling $450 million to Rothstein.

As you can imagine, the crew over at BSS&S aren’t thrilled with the accusations and called the suit, “inaccurate and flawed,” and claim that they “conducted [our] duties professionally, conscientiously and in good faith.”

Well, the trustee obviously doesn’t see things that way and laid out several allegations, specifically, the following:

• Berenfeld improperly adjusted RRA’s income by $20 million in 2007 and by $75 million in 2008.

• Berenfeld withheld information from RRA President Stuart Rosenfeldt (who has claimed he had no knowledge of firm finances and couldn’t read a balance sheet).

• Berenfeld prepared tax returns in a way that did not distinguish between RRA operating cash and client trust funds, giving the misimpression that RRA had more available cash than it actually owned.

• Berenfeld did not pursue information about bookkeeping after RRA staff – including CFO Irene Stay and COO Debra Villegas – denied access to information about bank statements, fee income and trust accounts.

• Berenfeld “knew of wildly inaccurate RRA bookkeeping and inadequate accounting personnel evidenced by the way in which books and records were created and maintained, leading to extraordinary adjustments, tantamount to rewriting the books and records of RRA.”

• Berenfeld provided a “nebulous” letter to Rothstein to help cover up $15 million in suspicious transactions in response to an anti-money laundering compliance inquiry from Gibraltar Bank.

Now, we’ve heard that law firms aren’t the best when it comes to running their businesses, but ‘wildly inaccurate bookkeeping and inadequate accounting personnel’ that leads to ‘extraordinary adjustments, tantamount to rewriting the books,’ takes things to a whole new level. Berenfeld employee TerryTracy Weintraub gets special attention in the suit, so we can presume he’s the one responsible for knowing – and not being too concerned – about RRA’s exceptionally shitty books. Oops!

Accounting firm sued over Rothstein work [SFBJ]

IRS Agent/Hero Thwarts Robbery Attempt, Shooting Suspect

This guy/gal is going to get a big slap on the back from Doug Shulman:

An Internal Revenue Service criminal investigations special agent shot and wounded one person during an apparent robbery attempt in San Francisco’s Bayview District overnight, police and an IRS spokeswoman said.


Our hero was apparently on duty at the time which, apparently, isn’t strange:

[IRS Spokeswoman Arlette Lee] said agents are on call 24 hours.

“It is not unusual for IRS agents to be out at different times of the morning or evening,” Lee said.

Lee said IRS special agents carry firearms but could not immediately confirm that the agent involved in the shooting had fired a service weapon.

In other news, IRS Agents also eat but are impervious to coffee.

IRS agent shoots suspect during robbery attempt [Mercury News]

Earlier:
Those IRS Shotguns Are Seeing Some Action

(UPDATE) CPA Status and Promotions: What Is Your Firm’s Policy?

With all the news on raises, promotions etc. etc., a reader got in touch, asking the following:

Can we start a thread to discuss when you need the CPA designation if you want to move up at various firms by practice (audit, tax, specialty groups, etc.) and what exceptions there are?


The idea jumped off of a recent comment on yesterday’s post discussing E&Y’s raises keeping pace with PwC:

From what I can derive, PwC was bleeding staff in the early part of the year to the best of my knowledge, requires more time to get promoted up the ranks (3 years to senior compared to 2 at all other firms) and the requirements are higher (must have passed the CPA exam). The higher raises, at least from PwC’s perspective, may be their way of staying competitive with the market because, without higher pay, PwC is not competitive. E&Y may also be attempting to compensate but I am not entirely sure what for.

So three years to earn a promotion to SA at PwC isn’t news to us and some – dare we say, many – may argue that should be the standard timeline for associates in the Big 4/second tier firms. You can debate that all you want but what about the CPA requirement? If PwC does in fact require their associates to have their license before making SA, that’s nothing if not a motivation to finish the CPA ASAP. At the same time, there are many SAs that don’t have their license that do excellent work but for whatever reason are still stalling on obtaining the CPA.

The reader continues by asking:

For instance, if you have an Enrolled Agent, can you still make manager if you’re in tax, etc. [?] I’m also curious about any place that will demote anyone of a certain level who hasn’t gotten their CPA in the last couple of years. KPMG has threatened it for managers in tax who are qualified to sit for the exam (U.S. accounting degree with enough hours), but I wonder if that’s more empty talk.

That’s the first we’ve heard of a demotion for not having a CPA but frankly, that seems appropriate. If the manager has an EA, then perhaps that’s a suitable exception, although the idea of a Big 4 tax manager without a CPA just doesn’t seem right. For many, the lack of the those three precious letters means the end of their careers at the Big 4, so it’s definitely an issue.

So indulge our reader and let us know your firm’s policy regarding promotions and CPA license status. Does it matter? Are there exceptions? Should your performance make up for your uncanny ability to fail FAR? Talk it out.

UPDATE: We obtained a copy of the KPMG policy mentioned above and it appears to be FSF with a few exceptions for those that are “CPA Eligible” and certain “waivers.” Also there’s this, “In circumstances of noncompliance without appropriate waiver, professionals may be subject to disciplinary action, including but not limited to demotion or termination from the firm.”

KPMG Tax Promotion Policy

Email Reminds KPMG Tax Group That You Best Remain Chargeable in the Summer-Fall Busy Season

As summer creeps to a close, that means one thing for Big 4 tax compliance folks – Busy Season 2.0. In a lot of ways, this time of year can be worse than the late winter/early spring as the drop deadlines approach and your deadbeat clients that never get you what you need on time remind you why they are your deadbeat clients.

It also means the return of mandatory 50+ hour weeks (that’s on the low end). Typically a simple communication from one of the higher-ups in your group should suffice but sometimes a few extra instructions get included. This was the case in an email sent to the troops in KPMG’s Fed Tax Group in the Dallas office yesterday afternoon:

From:

Sent: Wednesday, August 04, 2010 2:42 PM

To:

Subject: 2010 Fall Busy Season Hours

The summer-fall busy season is now upon us. Effective immediately through September 15th, all senior associates and associates in the Fed Tax practice should have a minimum of 50 hours of chargeable work per week. If you don’t have work to fill this time, please contact Elizabeth Emerson immediately with your availability and she will work to assign your time to projects. New this year, if you have any unassigned time, the expectation is that you will send a short email to your manager and copy [redacted] on a daily basis with the number of available hours (out of 10) that you have to work on projects. As you are assigned please remember that it is imperative to keep [your timesheet] updated and accurate.

Thanks in advance for all your hard work and efforts during this busy season.

The “short email” probably won’t apply to many SAs but there are probably more than a few A1s and A2s that will find gaps in their day and a quick typing of “I’m unassigned for X hours” today will probably suffice. Annoying? Yes. Necessary? Perhaps. As everyone knows, if you’re not fully chargeable, it could mean the end of your illustrious Big 4 career (and even if you are, that might not save you) and Fed Tax compliance is known a popular group for layoffs come post-October 15th.

But our source interpreted the email this way:

I guess we will have to start asking for permission to check emails and take bathroom breaks, otherwise we will have to “send a short email on a daily basis” explaining why we were unchargeable for 30 minutes a day…

So tax people – how do you read this email? A friendly reminder with a simple request or just one more thing to lump on your pile? Discuss.

Accounting News Roundup: Tax Cuts Debate Rages On; Tax Issues for A-Rod’s 600th; Wyclef’s Campaign Stumbles Out of the Blocks | 08.05.10

Geithner Pushes Tax Boost for Wealthy [WSJ]
“Treasury Secretary Timothy Geithner made the Obama administration’s economic case for letting tax cuts for high earners expire at the end of this year, saying that failure to do so would harm rather than help economic growth.

In a speech Wednesday in Washington, part of the administration’s broader strategy to overcome Republican opposition on the issue, Mr. Geithner said that keeping current tax levels even on a short-term basis “would hurt economic recovery by undermining confidence that we are prepared to make a commitment today to bring down our future deficits.” The government needs the revenue it would get from allowing tax rates for the wealthy to rise, he said.”

PCAOB Logs No Progress on International Inspections [Compliance Week]
“The Public Company Accounting Oversight Board isn’t yet making much headway in catching up on overdue international inspections, but the Dodd-Frank financial reform bill at least clears an obstacle the board has repeatedly blamed for its inability to meet its inspection mandate.”

Regulator fears auditors may abandon scepticism to meet deadlines [Accountancy Age]
“The Auditing Practices Board (APB), which sets standards for the industry, is concerned auditors might be abandoning their professional scepticism to meet contractual audit deadlines, and wants to coach them in how to be sceptical.

Audit contracts are often negotiated on the assumption few problems will be revealed, according to the APB. When a potential issue does arise timetables often have to be extended.”

A-Rod’s Home Run Ball: a Tax Headache for the Record Books? [WSJ]
The ball is reportedly worth around $100k and if the ball is technically Yankees’ property and the team were to give it to A-Rod, then he may owe tax and the Yanks would get a corresponding deduction. The team could also argue that the ball is technically A-Rod’s property and then neither would owe tax.

Of course then the question remains, what if A-Rod sells or donates the ball to a nonprofit? If he sold it, then it would depend on how long he keeps it (less than a year would be at ordinary rates, greater than a year would be at capital gain rates). While donating the ball after one year could net him a near full deduction.

TheStreet.com names Thomas Etergino finance chief [AP]
Tom starts his new gig on September 7th.


IRS Hits Wyclef With $2.1 Million In Tax Liens [The Smoking Gun]
Whether it’s the U.S. or Haiti, this is not how you want to start a Presidential campaign.

Delta Said to Plan New York JFK Hub Renovation for $1.2 Billion [Bloomberg]
Anyone that has been to Terminal 3 at JFK is aware of the problem.