Author: Caleb Newquist

Founding editor, Going Concern.

PCAOB: We’re Not Saying Perfect Audits, Just Pretty Perfect Audits

Thumbnail image for epic-failure.thumbnail.jpgThe public understanding of what auditors actually do is, to put it mildly, frustrating. If you were ask the average dude on the street what auditors’ responsibilities were, “Find fraud” would probably be the first thing that you would hear.
With all the public outrage against everything remotely related to finance or accounting, politicians feel like they have to do something. This usually amounts to putting pressure on bureaucrats, who in turn make rules to appease said politicians who can then point to accomplishments.


The PCAOB is no exception, and regardless of its potential extinction, has a go-getter attitude that includes potentially making the public’s perception more of a reality.
FEI Financial Reporting Blog:

Although not part of the PCAOB’s formal standard-setting agenda for the upcoming year, some SAG members argued there was a need for the PCAOB to revisit the fundamental fraud standard (SAS 99) as a standalone or ‘foundational’ standard, in much the same way as the PCAOB is in the process of re-proposing its suite of risk assessment standards as ‘foundational’ standards.

You probably know where this is going:

In response to questions, Silvers said, “We should not expect that every audit is a forensic audit… that’s absolutely not what I’m saying.” However, he added, “I think we need to move the dial a little bit so auditors have some greater obligation than is currently embodied in the current fraud standard, to have an obligation to act when there is reasonable suspicion of fraud.”
“This was subject to some extensive discussion in the Treasury committee (Treasury’s Advisory Committee on the Auditing Profession or ACAP],” said Silvers, adding, “some people, Lynn [Turner], may feel my approach is not tough enough, some people felt we should move to some absolute liability standard [i.e.] if you don’t find fraud, it’s the auditors fault; but it’s also not my view that looking for fraud is not related to the audit, that doesn’t parse with the public’s [perception] of the audit profession.”

Our emphasis. So not every audit will be a forensic audit, so, just most of them? That’s a relief.
So not only do you need to get way better at auditing fair value, now the brain trust at the PCAOB is considering putting more auditor flesh on the hook when it comes to finding fraud. So not absolute assurance but it’s getting there.
PCAOB Announces Ambitious Agenda; May Be Time to ‘Dial Up’ on Fraud, Silvers Says [FEI Financial Reporting Blog]

Preliminary Analytics | 10.15.09

Thumbnail image for Thumbnail image for allen_stanford_1110321c.jpg• Stanford lawyer complains over level of care in prison – Apparently its not too good, as Stan is looking a little gaunt these days, sayeth the FT. [FT]
• Elk Grove Village man accused of stealing millions from investors in Ponzi scheme – “Authorities said that between Jan. 1, 2007, and Oct. 9, 2008, Carney duped investors by creating the false impression that he had cutting-edge software designed for buying and selling securities. According to one investor, Carney claimed the program received market information three minutes before other traders.” [Chicago Tribune]
• Limbaugh Dropped From Bid to Buy Rams – You know who’s to blame dontcha? [NYT]
• An Apartment Complex Teeters – “The sprawling Manhattan apartment complex known as Peter Cooper Village and Stuyvesant Town — acquired for $5.4 billion in 2006 by a venture of Tishman Speyer Properties and a unit of BlackRock Inc. — is running out of cash. As of the end of September, it had $33.7 million left of the $400 million in interest reserves set up to service its debt, according to the people familiar with the matter. At its current burn rate of about $16 million per month, the reserve could be depleted before the end of the year, the people said.” [WSJ]
• Goldman Shows Strength While Citi Limps Along – Moving on to… [DealBook]
• Capital One credit card defaults rise in September – “Credit card defaults usually track unemployment, which rose to a 26-year high of 9.8 percent in September. The jobless rate is expected to peak at more than 10 percent by year-end.” [Reuters]

Review Comments | 10.14.09

Thumbnail image for Thumbnail image for two thumbs up.jpeg• Blue Chips Breach 10000 – OHHHH BOY. We heard something about a cake and Maria Bartiromo but that could be a rumor. [WSJ]
• IRS Steps Up Offshore Money Hunt as 7,500 Disclose – Believe it when we tell you that if you’ve got an offshore account and you haven’t declared by midnight tomorrow, armed men in masks will be storming your home and you will be made an example. [Bloomberg]
• Your dog may soon be able to fetch you a nice big rebate on your federal taxes – Up to $3,500 in Washington. [NYDN]
• FASB Links GAAP with XBRL through Codification – That should help. [Compliance Week]
• Survey. Last time. Swear.

Dallas Mayor: Deloitte Is Definitely Moving All Its Employees Downtown

Thumbnail image for DTa.jpgMaybe! Deloitte won’t commit to that but Dallas Mayor Tom Leppert says its a done deal.
Well, sorta: “Leppert said Deloitte has not yet signed a lease, but he’s confident the company will finalize a lease to consolidate nearly all of its North Texas operations in its existing 150,000 square feet at Chase Tower.”


Hizzoner obviously doesn’t mind jumping the gun here because he’s so psyched about all the Uncle Danglers spending their hard-earned dollars in the downtown area.
Dallas Morning News:

The average Deloitte salary is $100,000, according to a city report to the Dallas City Council Economic Development Committee obtained by The Dallas Morning News. The report estimates that Deloitte would generate an economic impact of more than $3.5 billion to Dallas over 10 years. That impact includes salaries, taxes and spending by employees and clients.

An average salary of $100k? Not bloody likely if you’re including staff and support but hey, DMN, go with it. Help us out Deloitte Dallas, is that number legit or bunk?
On another note, sorry Irving, sounds like you’re SOL on some sweet Deloitte action and Dallas sure as hell isn’t being shy about dancing on your grave. We’re sure you’ll be able to screw them over somehow. Let us know how it goes.
Deloitte may move most of its local offices to Chase Tower in downtown Dallas, mayor says [Dallas Morning News]
Earlier: Apparently $2 Mil Is Enough to Keep Deloitte in Dallas

Deadline Watch: The Tardy Client

box of receipts.jpgA little over 24 hours from now, anyone that is currently up to their asses in 1040s will grab the nearest person and try to shameless make out make out with them like it’s V-J Day.
Between now and then however, a client will call some of you DEMANDING that you complete their return that has a dozen K-1’s and a mind-numbing AMT calculation, before the midnight deadline. Oh, and they don’t want to pay any tax.
You, typically being the mild-mannered accountant, just up and lose your shit on this unsuspecting client, who then realizes their tardiness is the cause of this little conundrum, not your lack of a magic wand.
Congrats! You’ve successfully convinced a client that they’ll be filing late, paying a penalty and hereby suck at life. They deserve it anyway, asshats. Feel free to discuss your favorite delivery of last minute bad news to clients and enjoy the next 24 hours, 1040 trolls.

The SEC Probably Thought Madoff Victims Would Just Let the Whole Thing Slide

Thumbnail image for Thumbnail image for Thumbnail image for 140px-United_States_Securities_and_Exchange_Commission.pngFinally someone has had enough of the SEC’s new-sheriff-in-town act and is suing their asses for missing Bernie Madoff’s not so subtle Ponzi scheme.
Two victims are suing the House of Schape for their money that just up and disappeared, which amounts to $2.4 million. The suit also serves as a friendly reminder for the Commission that they sucked at their jobs big time for the better part of a decade.
According to the suit, the two victims, Phyllis Molchatsky and Steven Schneider, initially tried playing nice by filing administrative claims with the SEC but the Commission told them to get bent, thus allowing Molcahtsky and Schneider to sue in Federal court.
This may result in other Madoff victims filing suit as well, so our advice to M. Schape would be to call over to the Fed and to see if she can borrow that money printing machine.
Two Madoff victims file lawsuit against the SEC [Reuters]
See also: Madoff Victims Devise Hedging Strategy [DB]

E&Y Partners Should Work on Their Ice Breakers Prior to Talking Layoffs

The Pacific Northwest Area leaders have a town hall meeting in the Area offices. The retiring Area Managing Partner and incoming partner both show videos of each other to “introduce” them to the little people. These videos brag about how one collects ferraris (shows other partner in his ferrari at the show room) and the other shows the incoming partner’s closet full of Jimmy Choo shoes. And the best part?? It was at this meeting where they tell people (everyone from admin to partners) that they are making 5% cuts in December…And then of course they proceed to go through multiple rounds of cuts – Dec, March, June and not sure if it is over.

We enjoy an Italian sports car as much as the next guy but for crissakes, using it to segue into layoffs? Do you think they ran this script by anyone or did they just wing it? If you’ve got other stories of tawdry behavior, by all means, pass them along.

Deloitte Is Super Proud of Their 100% Free Preventive Healthcare

Thumbnail image for Thumbnail image for Reno.jpgA source at Deloitte let us know that at least one partner thought it was pretty kick ass that Uncle Dangle was providing healthcare coverage that basically amounts to an HMO:

I got off a call where a partner seemed pretty pleased w/ himself (read: the partnership). “100% Free Preventative Healthcare” was how it was termed. I’m not sure how it affects others, but frankly under my plan, there wasn’t a difference. Just thought it was funny that a big-deal was made of it when the difference was non-existent.

More, after the jump


Text from Deloittenet:

Deloitte’s Total Rewards team worked with our national medical plans to offer 100 percent coverage of in-network preventive care to all of our program participants as of January 1, 2009. This care applies to well-man, woman, and child visits, including lab tests and other preventive screenings. With such a generous preventive care benefit in place, there is no longer a need for the Physical Exam Reimbursement Policies (Administrative Policy Release 465 for partners, principals and directors and Administrative Policy Release 266 for senior managers and managers).
By using an in-network provider through one of Deloitte’s national medical plans, you are able to receive important preventive health care benefits at no cost. A detailed description of the preventive care benefits available through each of the plans is available on DeloitteNet.

Thanks for the notification D. Save us all the trouble and just call it an HMO. It’s certainly arguable that HMOs have been shown to increase wellness but why the hell didn’t they just claim to have invented the Internet?

(UPDATE 2) KPMG Atlanta Shake-up Makes Us Wonder

pool boy.jpgLeadership changes are inevitable in any business but the reasons can be a mystery. Dismal performance? Drugs? A pool boy? All of the above??
Tim Flynn (taking a break from his caddying duties) and John Veihmeyer sent a very upbeat email to the Atlanta office yesterday announcing the new office managing partner there.

Atlanta Office Leadership
A Message from Tim Flynn and John Veihmeyer | October 13, 2009
We are pleased to announce the appointment of [redacted] as managing
partner (OMP) for Atlanta, succeeding [redacted] who has moved into a
client facing role reflecting our commitment to focusing our most
experienced Partners directly on the marketplace.
We want to first thank [redacted] for his many contributions to the Atlanta office and for his leadership roles as lead area managing partner and Southeast area managing partner for Audit. In his new role, [redacted] will be focused on developing new market opportunities, serving some of our largest audit clients and assisting national and local leadership with client care and major proposals.
[Redacted] brings more than 27 years of experience to his new role. He is currently the Global Chairman of Industrial Markets and the National Sector Leader for Energy & Natural Resources, based in Houston. [Redacted] has spent the majority of his career serving energy clients, including Duke Energy, Chevron, Schlumberger, and Spectra Energy.
A well-recognized industry speaker and thought leader, [redacted] was a speaker at the 2006 World Economic Forum meeting in São Paulo. He is also a frequent guest on CNBC’s Squawk Box discussing energy issues and is a regular contributor to energy trade magazines. Since 2003, [redacted] has hosted KPMG’s Annual Global Energy Conference, which is attended by 500-600 energy executives each year.
Please join us in wishing both [redacted] and [redacted] success in their new roles, and in thanking [redacted] for his many contributions as leader of the Atlanta office.
Tim Flynn
Chairman
John Veihmeyer
CEO & Deputy Chairman

Ohhhhh, Squawk Box. That’s a feather in your cap.
Our source told us that: “‘Moved into a client facing role’ means you’ve been demoted in KPMG speak.” We asked around and it’s not clear just what the hell that means but we’ll run with it.
If you’ve got some more information on the shake up at the Radio Station Hotlanta, let us know or discuss in the comments.
UPDATE, 2:45 PM: We’ve received some tips confirming a new Dallas managing partner and have also heard there will be some shifting around of leadership in the New York office but we don’t have many details, so please share.
UPDATE, Thursday 2:49: According to another source, Southeast AMPs for the Tax and Advisory Practices are also being transitioned into client-facing roles.

Preliminary Analytics | 10.14.09

magic money.jpg• Thanks to everyone that has participated in our survey so far. If you haven’t yet, you can expect Chuck at your cubicle at some point today. Unless you do it now by going here.
• Wall Street On Track To Award Record Pay – “Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal.” – Tooo long. [WSJ]
• Geithner Aides Reaped Millions Working for Banks, Hedge Funds – This is nice. It’s been for too long since we had some good wholesome populist outrage. [Bloomberg]
• Bernie Madoff Breaks His Prison Fight Cherry – Apparently someone said “Dow 3,000” and Bern just flipped. See also DB. [JDA]
• Bloomberg Wins Bidding For BusinessWeek – For $5 mil. Estimates were that it was worth $1 bil back in 2000. Ouch. [BW]

Review Comments | 10.13.09

Thumbnail image for Thumbnail image for ey_bandaids.jpg• Don’t forget to take our survey. Again, it’s harmless.
• Heller Creditors to Go After Partners and Accountants? – One more lawsuit won’t hurt, E&Y. [AM Law Daily]
• IRS: Infant Formula Not Deductible by Mother With Double Mastectomy – Oh, that’s nice. [TaxProf Blog]
• High Court To Hear Ex-Enron CEO’s Criminal Appeal – Too bad Ken Lay kicked the bucket. He’s missing the SCOTUS and possibly Broadway. [AP via NPR]
• Judge in Bear Stearns trial rejects jurors for bias – Nice way to start things. [Reuters]
• Senate Finance Panel Approves Health Bill, 14-9 – God, if only this was the end of it. [WSJ]