Author: Caleb Newquist

Founding editor, Going Concern.

Crowe Horwath Files Creditor Claim Against Michael Jackson Estate

How’s this for weird: accounting firm Crowe Horwath has filed a creditor claim against the estate of Michael Jackson, claiming that they handled his “business affairs until the day he died,” according to TMZ.

The claim is for about three weeks of work, from June 4, 2009 to June 29th (DOD) and the total bill reported is $38,495.

Since this was the weirdest thing we’ve read in the past hour, we called up Crowe to find out their side since TMZ didn’t seem to bother. They’re currently checking into it and will hopefully get back to us. Stay tuned…

We Worked for Michael Jackson Til He Died [TMZ]

Latest IRS Snafu: Inmates Collect $100k in Refunds

This is getting ridiculous, you guys. As if suicidal pilots and bulldozing protestors weren’t enough of an annoyance, now the Service has been victimized by inmates in a South Florida jail.

According to the AP, about 50 inmates are allegedly responsible for requesting $1 million in fraudulent refunds from the IRS and collecting around $100,000 for their diligent efforts. The report states that the inmates used “a standard IRS form” (we’re guessing Form 843?) most for $5,000 and that some checks were sent directly to the jail. Oh and the best part is that the scheme was foiled by “a how-to note…found in an inmate’s cell,” rather than a crack squad of investigators.


To say that the IRS needed some good press would be a gross understatement, but for crissakes, they need some good press. Sure getting Nicolas Cage to bone up $14 mil is okay and everyone is stoked for Ron Howard to make the Service hilarious but they could use a big break right now. We called the Florida branch to get their ideas but the spokesman told us that the Herald pretty much had it right and that’s all that he was saying.

At this point, nothing short of Doug Shulman capturing Osama Bin Laden (with an IRS-issued Remington no less) while singing God Bless America and apologizing for all the unanswered customer service phone calls will get the American public to looking fondly upon the IRS. If you’ve got better ideas, let us know but that would be our suggestion for an improved image campaign.

Inmates at S. Fla. jail accused of scamming IRS [AP via Miami Herald]

SEC Deadline Watch: One Week to Go For Large Accelerated Filers; Is It Really the End?

Not that we need to tell any of you working on a LAF but marking the occasion seems appropriate. For those of you would like to know just what the hell it is we’re talking about, March 1st is the 10-K deadline for large accelerated filers (market cap of $700 million or more and few other conditions).

The sleepovers and MSG overdoses are almost over! Plus, now you can dump your busy season bitch. Rejoice!


Actually, not so fast. Whether or not next Monday’s deadline brings an end to your busy season is another story. Some of you may be lucky enough to coast for the next month or so but since staffing was an issue for more teams than usual this year, we’re guessing most of you will get to hop on another team to help them cross the finish line.

For those of you not on an LAF, you’re probably relieved if you happen to be getting an extra set of hands in the coming weeks. And then there are those of you that don’t work on public clients at all that probably need the help but won’t be getting it for another two weeks when the next deadline passes. Even then you might not get the extra help you need.

Well, shit. Maybe we shouldn’t have brought it up.

Today in IRS Resistance: Ohio Man Bulldozes His Own House

What’s the saying about trends? We can’t remember it but after the suicide attack on the IRS last week, we now bring you a less violent but equally ineffective middle finger to the IRS.

Terry Hoskins, of Moscow, Ohio had IRS liens slapped on his carpeting store and other properties. Apparently he used his personal residence as collateral on the business and these other properties, leading his bank to foreclose on his home. Hoskins wasn’t okay with that:


Whether Terry the Bulldozer was looking to get a Facebook following out of this, isn’t entirely clear. But we will give the guy credit; even if he did this to himself by putting up his personal residence for some bad business deals, he’s got pretty creative for the sake of making a point.

“I made a bad business decision. Fuck you IRS! Up yours, RiverHills Bank! You think I’m not serious? I will rent heavy machinery to prove my point. I will make my loved ones temporarily homeless. I will go on a local NBC affiliate to talk about it. How do you like me now?”

Unfortunately, the timing couldn’t be worse. If that attention whore Joe Stack hadn’t gone on his little flight, Terry could be enjoying Joe the Plumber-esque fame right now. Next time, Terry.

Wake Forest Students’ CPA Exam Domination Is Explained

Last week we briefly mentioned Wake Forest’s announcement that their graduates had achieved the highest average scores on the CPA exam for the fifth year in a row. Wondering how such dominance could be made possible we decided to get ��������������������ate Professor Dr. Yvonne Hinson to find out.


The two main points that is primarily responsible for WFU students’ success on the CPA exam that Dr. Hinson impressed upon us were the ambition of the students and the curriculum that they go through. “We bring in very good students through our screening process and the students create an extremely competitive atmosphere,” Dr. Hinson told us. To compliment these go-getters, the faculty is always thinking ahead as to how to make the curriculum as challenging and relevant as possible.

Here are a few questions we asked Dr. Hinson about the success at Wake Forest:

What helps Wake Forest accounting students be so successful on the CPA Exam especially since these scores are for students without advanced degrees?

I believe that this relates to multiple things including:

1) Innovative curriculum that constantly changes. We teach the basics but try to always stay abreast of the emerging trends in the industry an incorporate those throughout our program where we decide they are relevant and ongoing. An example is out IFRS integration last year which was a full curriculum integration. We received a grant from PwC to complete this.

2) Faculty that are incredibly tied to the profession

3) Small class sizes and a lot of interaction between faculty and students. You can NOT hide in our classes!

4) Strong, motivated students.

5) We use Becker CPA review but the sections are handled my subject matter experts rather than all sections of Becker supervised by one or two people. Our faculty actually teach the Becker review.

Does the faculty make a point of communicating the importance of the exam?
Not really – there is the usual marketing around the results but the students tend to be very competitive and really drive a lot of that themselves. We do stress the importance of trying to get it out of the way before you begin work rather than trying to work busy season hours while also studying for the exam.

What is the biggest key that you (and your fellow faculty members) tell your students with re: to the exam?
Get it out of the way!! You do not want to be taking it while working if possible. We offer the review in May and June in an intensive session so that this is all they are concentrating on at that time.

Do most students take review courses in preparation for the exam?
Yes – Becker

What steps is the University taking to prepare students for IFRS and its eventual inclusion on the exam?
We have already integrated it throughout our undergraduate and graduate curriculum. We feel that the issue has nothing to do with where the U.S. is in respect to IFRS but rather that our students go our and operate in a global environment and are exposed to IFRS issues soon after graduation. Therefore, we have fiduciary duty to the students and to the profession to expose them to IFRS in their program.

Speaking of current topics, we also asked about Wake Forest implementing forensics into it’s curriculum, Dr. Hinson was quick to note, “Forensic accounting is also implemented in curriculum here, as this is another important area we recognized that our students would need exposure to.” Dr. Hinson mentioned Dr. George Aldhizer who she told us is “not on the leading edge but the bleeding edge of forensic accounting.” Indeed, Dr. Aldhizer’s most recent publication was “Medicare and Medicaid Fraud and Errors: A Ticking Time Bomb that Must Be Defused” for the Journal of Government and Financial Management. We’d say you can’t get more current than that.

One additional interesting thing we learned is that Wake Forest also offers a “Transaction Services Track” as part of its Master of Science in Accountancy that prepares many students for a career in in the advisory practices of the large firms.

So not only is the University taking a progressive approach to the CPA exam, they are preparing students for their careers in public accounting by offering a wide curriculum that will serve them in various areas of the firms. We applaud them in their effort and hope more schools take their lead.

Congratulations to Wake Forest on their five-peat (?) and the continued success of their students and faculty.

Accounting News Roundup: Deloitte Consulting Is on a Hiring Spree; IFRS = Fool’s Errand?; Wesley Snipes Thoughts on IRS Plane Crash | 02.22.10

• Deloitte Consulting is Hiring [BusinessWeek]
According to BW, Deloitte is making 50 – 60 offers to experienced consultants a week, 800 new MBAs and undergrads have started with the firm in the last six months and 1,000 more offers will be made to 2010 graduates. That’s an impressive hiring spree from where we stand.

What’s not clear from the article is why the hiring is occurring at such a furious pace. You would think with the addition of 4,000 BearingPoint employees, hiring at the firm would be muted but apparently that’s not the case. The article cites DC’s utilization rate at 80%, so there’s plenty of work and DC is “inordinately high market share in mergers and acquisitions and other deals of more than $5 billion in value” and a new focus on “implementation” and “putting together strategy” for their clients.

While there’s no reason to doubt the hiring numbers, the article cites few specific examples of why the all the new blood is needed. If DC is unable to develop new business in a weak economy, the 80% utilization rate might be temporary.


• The Holy Grail of Accounting Is a Fool’s Errand [The Summa]
Professor David Albrecht doesn’t mince words on the issue of International Financial Reporting Standards, “Let me say it again, so no one can possibly misunderstand: The United States quest to join in a single set of global accounting standards (either by convergence or by adoption of IFRS) is a fool’s errand–completely absurd, pointless and useless.”

Okay but in case you’re not inclined to take him at his word, he goes on to explain:

What makes this a fool’s errand is there exists no reason for it. No one has explained what benefits exist that outweigh the need for regulation on a country by country basis.

I understand that the partners of some of the largest auditing firms will get rich, as will certain regulators that facilitate the convergence (such as David Tweedie, Mary Schapiro and James Kroeker).

What I don’t understand is why a move to a more independent private accounting setting organization with increased reliance on large audit firms will produce more effective government regulation when such actions in the past have resulted in less effective government regulation.

It’s almost a certainty that the market would become more reliant on the largest firms if the U.S. moved to IFRS and firm failure is a big concern since some are already preparing for it. Maybe the U.S. regulators are making like the ostrich?

And since the Big 4 were pushing IFRS at Davos and the SEC seems to be going along with things (tepidly) maybe the Professor is onto something here?

• Snipes asks ‘What’s new?’ about IRS plane crash [AP via TaxProf]
Well, to our recollection, no one has flown a plane into an IRS facility to complain about tax law.

The IRS Wants a Piece of Eve

Don’t we all. But seriously, what the hell is wrong with celebrities that can’t manage to pay their taxes? CPAs aren’t that expensive.

Eve isn’t in Nicolas Cage tax trouble with her little bill to the IRS but then again, who is?

The hip-hop star/actress/Who Wants to be a Millionaire contestant (charity, we hope?) owes around $357k from four different liens, two filed by the IRS and two by the state of California from ’08 and ’09.

So let’s brainstorm to help get this girl out of trouble. Is Barbershop 3 in the works? The Glee thing seems to have gone okay but do TV gigs pay enough? She’s not making Seinfeld money after all. Is WWTBAM still a series? Maybe they’re running it in the old Soviet Bloc and she can get on it there…

Hip-hop star Eve hops over tax bill [Tax Watchdog]

When Will Accounting Firms Fully Embrace Social Media?

Accounting firms seem to be on the fence when it comes to social media. While the Big 4 recruiting teams (and non-Big 4 for that matter) are into it full force, we’re skeptical about the enthusiasm of the firms’ leadership, especially the operational leaders.

To them blogs, Facebook, Twitter et al. is a way to waste time and has nothing to do with producing results. But now that Microsoft has announced that it will be including plug-ins for Outlook (sorry, firms on Lotus Notes), we wonder if the momentum behind social media will prove too much to ignore forever.


There are some signs of acceptance including Stephen Chipman (still needs to make it public)and Jeremy Newman communicating through the blogosphere, the growth of social networking and, as we mentioned, recruiting. Eventually the firms will come around, but when?

Our friendly HR expert, Dan Braddock thinks it won’t be long, “Facebook’s privacy settings are getting sophisticated quickly; someone can make their Facebook page look as professional as a LinkedIn profile.”

And what about friending clients, co-workers and potential recruits? “People are getting more and more comfortable with the idea, so it won’t happen right away but in 3 to 5 years, you’re going to start seeing more of it,” DWB said.

Microsoft’s director of technical accounting called out financial reporting as being pretty much irrelevant. It remains to be seen if firms continue to resist social media while the rest of the world continues to find ways to innovate by utilizing it.

Five Questions with the Jr. Deputy Accountant

You’re probably not aware of this but the Jr. Deputy Accountant (aka Adrienne Gonzalez) has been working outside her normal confines of the Bay Area this week in an undisclosed location.

While her current location is a mystery, what’s not up for debate is her ability to opine (frequently with too many words) on all things Federal Reserve, church accounting or the CPA Exam.

Besides her daily chores at GC, JDA has been published at a plethora of other blogs including Goldman Sachs 666 and BankFailFriday
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Why do you blog?
For the same reason people play Grand Theft Auto; it helps to have a productive outlet for my frustration with our regulatory and banking system. That and I’m an attention whore.


What are your three must-read accounting blogs and one must-read non-accounting blog?
I love Krupo.ca, Skeptical CPA, and The Summa. For non-accounting, I’d have to say either Lew Rockwell or Daily Reckoning for my daily dose of doom and gloom. I’m obviously a miserable bastard.

If someone had to read just one post of yours which one would it be?
I’m partial to my recent “Fed Year in Review” but with almost 2000 posts, how the hell am I supposed to pick favorites? “You Want to Audit the Fed But Why?” is also a favorite of mine.

Accountants are…
Awesome because they pay my bills.

The biggest issue facing accountants today is…
Globalization. It’s the vampire lurking outside of accounting’s window whispering “let me in” and too few accountants are focused on the impact. IFRS adoption in the United States is a perfect example of what happens when we bow to global expectations in financial reporting and accounting. I of course don’t believe we need to bow to anyone.

Arguments Heard in BDO Appeal of $521 Million Verdict

Oral arguments for BDO’s appeal of the verdict in the Banco Espirito fraud case were this past Tuesday, the 16th, in front of the Florida 3rd District Court of Appeal in Miami.

If you’re not familiar with this case, we’ll catch you up: Banco Espirito Santo International Ltd., Banco Espirito Santo S.A., and ESB Finance all invested in E.S. Bankest L.C. BDO served as the auditor of Bankest. Crazy massive fraud (bogus accounts receivable) was going on at Bankest that was discovered by Banco Esprito. Bankest went bankrupt, their executives went to jail, Banco Espirito lost millions.


Banco sued BDO in 2004 and in 2007 a jury found the Firm liable for malpractice and gross negligence. Prior to the jury’s decision, BDO CEO Jack Weisbaum testified that the firm would not be able to pay punitive damages. The jury didn’t care and awarded Banco $170 million in compensatory damages and $351.7 million in punitive damages for a grand total of $521.7 million, the same amount of accounts receivable that BDO “audited”. Now here were are, it’s 2010, appeals process. Whew. Follow?

We spoke with Steven Thomas, who has represented Banco Espirito Santo throughout this case, earlier this week and he filled us in on many details. BDO is appealing the verdict arguing that the case should not have been bifurcated (i.e. divided into two) at trial. In other words, it sounds as though BDO has resorted to arguing technical legal points in this appeal as opposed to defending against the finding that they both performed malpractice and were grossly negligent.

As we explained above, the malpractice and gross negligence arose out of BDO’s failure to discover the fraudulent accounts receivable at Bankest. At trial, Mr. Thomas told us that under cross-examination, the BDO engagement partner admitted that it was the auditors’ job to find fraud and then subsequently contradicted himself when being questioned by his own counsel, saying it wasn’t their job.

Regardless of what side you fall on in the whole auditors’ responsibility to discover fraud argument, Mr. Thomas told us this, “I have a litigated a lot of cases on this issue and we never, ever, ever lose.”

We reached out to BDO and Greenberg Traurig the law firm representing BDO for comment. Neither firm has gotten back to us.

BDO has indicated that it will appeal this case to the Florida Supreme Court if necessary and since BDO International was found to be not liable, the entire judgment falls to the U.S. firm. BDO had $620 million in revenues in its most recent fiscal year and currently has around 3,000 employees. And despite the fact that this case will not be resolved for some time, if BDO ultimately compelled to pay the damages it could have a devastating impact on the firm.