Author: Caleb Newquist

Founding editor, Going Concern.

Jim Turley Says E&Y Is Totally On Board with This Global Accounting Standards Thing

Thumbnail image for Thumbnail image for Jim Turley.jpgReally, he said that global standards were ‘imperative’ which carries a much more serious connotation and we’d hate to sell Big Jim short:
‘It is imperative that there is one set of financial reporting standards for the world if the quality and comparability of investor information is to be protected.’
And in an amazing coinkydink, that’s what everyone at the G-20 said too:
More, after the jump

In a statement the leaders said they: “call on our international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011.”

Since so many big shots were in the Burgh, last week, JT figured he’d just put it out there that his firm was FIRST! to say, “Yeah, we’re down for redoubling our efforts! Whatever that is, we’ll do anything! Don’t know about the rest of you slackers but we’re damn proud to get on this. June 2011? No problem. Am I right people?”
Ernsters? Ready to double down? It’s imperative, you know.
Big Four firm backs G20 accounting stance [Accountancy Age]

Crain’s: New York CPA Firms’ Employment Down 7%

Thumbnail image for thumbs down col.gifHopefully it’s not too early for bad numbers. Crain’s New York put some together to give you an idea about how bad the employment picture has gotten for accountants in the past year.
The total number of accounting professionals for the top 25 firms in New York was more than 23,176 as of June 30, 2009.
That number is down from 24,909, or 7% from the previous year. The Big 4 horsemen account for two-thirds of this total and, not surprisingly, they all reported drops:
Continued, after the jump

No. 1-ranked KPMG cut 13% of its professional staff, or 681 employees. No. 4, Deloitte, was not far behind in job shrinkage, with a decline of 378 staffers in the New York area, or 11.7%. Pricewaterhouse reported 350 fewer professional, or a 9.2% decline. Of the four, Ernst & Young posted the smallest loss: a drop of only 1.6%, or 67 professionals.

Crain’s list of details on the top five firms (Big 4 + RSM McGladrey) shows additional data, including KPMG having over 10% more total professionals in New York than the next highest, PwC.
Smaller firms including CBIZ Mahoney Cohen & MHM Mahoney Cohen CPAs (probably the most ridiculously long name for firm we’ve ever seen) and Weiser also experienced significant drops:

CBIZ Mahoney Cohen & MHM Mahoney Cohen CPAs, which saw a loss of 53 professionals, or 22.7%, despite last December’s acquisition of Mahoney Cohen by CBIZ & Mayer Hoffman McCann…Weiser…reported a decline of 10.7%, or 42 professionals.

Sorry for all the gloom. Here are some small bright spots:
• Eisner, hired 120 professionals, an increase of 25%
• Marks, Paneth & Shron, 47 and 13.4%
• Seymour Shapss Martin & Co, 20 and 11.7%
You don’t have to be John Nash to see that the drop by the Big 4 overtake any increases by the smaller shops. And seven percent seems like a pretty significant drop but what the hell do we know?
Discuss your firm’s (or former firm’s) numbers in the comments and feel free to speculate on the job outlook for the coming year. It’s not like it could get worse. Could it?
A hard number for accountants: 7% fewer jobs [Crain’s New York]

Preliminary Analytics | 09.29.09

Thumbnail image for allen_stanford_1110321c.jpg• Stanford moved to federal lockup in Houston – To help with this complicated case, say his attorneys. Lotta ins, lotta outs. [Reuters]
• Starbucks debuts Via instant coffee in U.S., Canada – So much for coffee purists. [Reuters]
• Rhetorical Tax Evasion – In case you were considering opting out of health care coverage under the new, not even close to being made law, plan. It could cost you 25 large. [WSJ]
• FDIC to propose banks prepay 3 years of fees: source – That should cover them. [Reuters]
• Too Small to Bail Has a Nice Ring to It – Sure. [Breaking Views via NYT]
• Restaurants Dangle Cheaper Drinks but Risk Watering Down Their Profits – The catch is, you’re hanging out at…Chili’s. [WSJ]

Review Comments | 09.28.09

r.jpg• Last day for our poll on the Year Ahead and be sure to submit your captions for the Emmys.
• Allen Stanford Can Take A Punch – Probably a small disagreement over some Lucky Strikes. [DB]
• Ex-Enron Broadband Co-CEO Sentenced for Wire Fraud – Does this mean that Enron on the stage will have to do a re-write before coming to the States? [Bloomberg]
• Treasury Department to Examine ACORN’s Compliance With Tax Laws – Surely this isn’t as bad as it sounds. [TaxProf Blog]
• SEC Charges Detroit-Area Stock Broker Who Lured Elderly into $250 Million Ponzi Scheme – Fundamentally disrespecting the elderly. In Detroit no less. This is some special kind of Ponzi Scum. [SEC.gov]
• Axa chief attacks accounting rules switch – Says accounting rules are ‘too important to be left to accountants’. Right. Because insurance companies and governments have such kick ass track records on the subject. [FT]

Phil Provides the Morale Boost All You KPMGers Needed

Phil-Mickelson_Tim Flynn.jpgUnless you hate golf and then you probably don’t give a damn.
Phil Mickelson may have turned his year around as the walking billboard for KPMG. Fill came from behind to win the Tour Championship yesterday, winning by three strokes over some no name. Apparently the Tour Championship is a big tournament so Fill/Phil* should feel good. You ALL should.
This will require a serious reassessment of Phil’s prior rating that we gave him last month after the PGA Championship.
We need your input on how to rank everyone’s second favorite golfer to be sponsored by an accounting firm. Give us your expert analysis in the comments on the impressive win and if you’re good, we’ll throw a 9-box out there at some point.

*Do we need to vote on this? This seems like a polarizing debate. Discuss.

CPA Exam Changes Shouldn’t Affect You

The CPA Exam is apparently changing, whether you like it or not.
More, after the jump


Web CPA:

The American Institute of CPAs has scheduled Jan. 1, 2011 as the official launch date of CBT-e, a more technologically modern version of the Uniform CPA Examination…CBT-e, short for Computer-Based Testing evolution, will also update the content of the Uniform CPA Exam. The exam will include new content and skill specification outlines, including questions about International Financial Reporting Standards…Also starting on Jan. 1, 2011, new authoritative literature will be released based on the FASB Codification of accounting standards and a new research task format will be introduced on the CPA Examination.

Considering this is over a year off, these changes should not be of concern for most of you but considering some of the scores we’ve seen for this year and pretty much everyone seems to be ignoring the new Codification, maybe some of you should be worried.

PwC India Auditors Found Guilty of Professional Misconduct

pwclogo.thumbnail.jpgThe Institute of Chartered Accountants in India (ICAI) have found two former employees of Satyam and four Price Watherouse India auditors guilty, according to Times Now:
Continued, after the jump

Two Satyam officials found “prima facia guilty” are Ex CFO V Srinivasu and Senior Vice-President, Internal Audit Cell, V S Prabhakara Gupta. The disciplinary committee also found four auditors from Price Waterhouse, Bangalore–S Gopalakrishnan, Srinivas Talluri, P Shiva Prasad and C H Ravindranath prima facie guilty of professional misconduct, [ICAI President, Uttam Prakash] Agarwal said.

The exact repercussions of this are not clear so we’re trying to run someone down at PwC to enlighten us. Hell, if you’ve got the knowledge, please share. In the meantime, as far as we know, two of the auditors are still in jail which probably made for a less than pleasant summer vacation.

Rumor Mill: KPMG Wants to Make Sure New Associates Are Comfortable

As if there isn’t enough bad blood in the land of Klynveld, we received this tip:

Not only did the firm spend thousands of dollars to send new hires to Rome, they also gave then [sic] all single rooms. Roomates [sic] are required for all staff level people at firmwide trainings.

We looked around and depending on when these new associates were in Rome, it may have been god-awful hot, so it couldn’t have been that great of a trip. Then again, we’re not familiar with this whole Italian get away so if you’ve got details, discuss in the comments or shoot them to us.

RSM/McGladrey & Pullen: ‘Breaking Up is Like Pushing Over a Coke Machine’

natalie-gulbis-.jpgAt least that’s one expert’s opinion. Allan Koltin, CEO of PDI Global, Inc., based in Chicago, thinks RSM McGladrey and McGladrey & Pullen will eventually be getting back together.

“I think what you’re seeing now is just the flexing of some muscles,” [said Koltin.] “What (RSM’s termination notice) does is reinforce what [RSM Parent, H&R] Block said before, which is that, if need be, they will go to the mat with them on this one.”

That’s a fine assessment but we all know what this is really about. The Gulbis factor. RSM/Block can go on and on about ‘administrative services’ and whatever hell else they think that’s in M&P’s ‘best interest’ but we understand the unmentionable factor here.
Sooner, rather than later, M&P had better come to their senses in this whole mess and realize that being associated with Natalie Gulbis is by far the best thing any accounting firm has been able to pull off since…yeah, pretty much anything.
McGladrey, RSM move to reconciliation [KCBJ (Subscription Required)]

Deloitte Passes on the Opportunity to Admit Mistakes

DTa.jpgObviously we were too busy promoting democracy and creativity to notice Deloitte getting named in Private Capital Management co-founder Bruce Sherman’s lawsuit against Bear Stearns.
Continued, after the jump


WSJ:

The lawsuit, filed Thursday in U.S. District Court in Manhattan, alleges that [Jimmy “Don’t Call Me Cheech”] Cayne and others at Bear made material misrepresentations about the company’s financial health and its risk management, causing Sherman to hold shares of Bear stock he “would otherwise have sold months before Bear ultimately collapsed.”
“Defendants knew that the market and the financial press would view Sherman’s sale of his Bear stock as a loss of confidence in Bear by a well-known and long-standing investor,” the lawsuit said. “This, in turn, would have undermined confidence in Bear’s management at a critical time when Bear’s liquidity and Bear’s valuation of its assets were open to question following the implosion of two Bear-sponsored hedge funds in the summer of 2007.”
Cayne; Warren Spector, Bear Stearns’ former co-president and chief operating officer; Bear Stearns; and its outside auditor Deloitte & Touche are defendants in the case.

Regardless of what Deloitte ‘knew’, the firm did not jump at the chance to start a trend of Big 4 firms issuing mea culpas. Big D issued the following statement, which we plan on to memorize for future reference, per the Journal, ‘Deloitte believes the complaint to be totally without merit and we will defend against it vigorously.’ We’ll continue to update you on the vigorous defense as it progresses.
PCM Co-Founder Sues Bear Stearns For Misstatements [WSJ]

If Failure = ‘Chaos’, What Does Chaos Look Like?

Riots.jpgThe British government has denied a change in the law there that would limit audit firms’ liability. The Big 4, who seem to enjoy a far more prestigious and influential existence in Britain than in the U.S., lobbied for a change to the law but it was ultimately dismissed by the British Business Secretary.
The British government cites existing law that would allow companies to reach agreements with their auditors to limit their liability.
Continued, after the jump

Under present company law, directors can agree to restrict their auditors’ liability if shareholders approve; however, to date, no blue-chip company has done so. Directors have seen little advantage in limiting their auditors’ liability, and objections by the US Securities and Exchange Commission (SEC) have also been a significant obstacle.

Ahh, the SEC, exerting its far-reaching influence another over sovereign government, not to mention their stellar track record . This does not amuse in the UK:

Peter Wyman, a senior PwC partner, who was involved in the discussions, said that the Government’s lack of action was disappointing. He said: “The Government, having legislated to allow proportionate liability for auditors, is apparently content to have its policy frustrated by a foreign regulator.”

The firms are lobbying, not solely for their own survival, dammit, but the sake of everyone, “They warned that British business could be plunged into chaos if one of them were bankrupted by a blockbuster lawsuit.”
We’re not really sure what ‘choas’ would entail. Hank Paulson had his own version of financial Armageddon but we hardly think that’s a plausible scenario if a Big 4 firm were to fail.
Perhaps there would be an army of accountants roaming the streets in zombie-like states offering their excel expertise to anyone that would accept it. While this is a completely horrifying scene, we’re skeptical of true ‘chaos’.
If you’ve got your own visions of chaos in the event of a large firm failure, describe it in the comments.
Audit firms left unprotected against claims of negligence [Times Online]
Also see: No legislated cap on audit liability [AccMan]