Category: ANR

Lack of MF Global Controls Exposed by Missing Money [Bloomberg]
MF Global Holdings Ltd. (MF)’s bankruptcy, the eighth-largest in U.S. history, is exposing a lack of internal controls that may have prevented a last-minute rescue of Jon Corzine’s futures broker. The day it filed for Chapter 11 protection, New York-based MF Global disclosed a shortfall in customer accounts that people with knowledge of the matter said may be about $700 million. CME Group Inc., which has the authority to audit those accounts, said yesterday it didn’t know how much client money was missing.

Judge BlBuying TaxAct [AT]
A federal judge has ruled against H&R Block to prevent the tax prep giant from moving forward with its $287.5 million acquisition of 2SS Holdings, whose 2nd Story Software unit develops TaxAct software, after the Justice Department objected to the deal.

Tax impasse threatens US deficit progress [FT]
Negotiations to strike a deal that could revive confidence in America’s ability to control its public finances are reaching a critical juncture, with a 12-member panel of Congress – equally split between Republicans and Democrats – weighing competing proposals to break the impasse. But so far there is scant evidence that a large-scale fiscal compromise is in the works, with big divisions persisting, particularly over taxes. The so-called “supercommittee” is due to report on November 23, and if a majority cannot recommend at least $1,200bn in savings for the US government over the next decade, a “trigger” will force automatic spending cuts worth that amount starting in 2013.

Deficit Panel Is Warned That It Must Not Fail and Is Urged to Compromise [NYT]
A co-chairman of President Obama’s fiscal commission told members of a powerful Congressional panel on deficit reduction Tuesday that he feared they would fail, and he said the consequences of such failure could be calamitous. Four experts on fiscal policy — two Democrats and two Republicans — told the panel that Congress should reduce the budget deficit by adopting spending cuts and increases in tax revenues. One co-chairman of the president’s fiscal commission, Erskine B. Bowles, said he had great respect for each member of the committee, but added, “I am worried you’re going to fail — fail the country.” Former Senator Alan K. Simpson, the other co-chairman of the commission, denounced Grover G. Norquist, the conservative antitax advocate, and AARP, the lobby for older Americans, saying both were obstructing efforts to reduce the deficit.

Cattles Claims ‘Gross Misstatement’ of Debt in PwC Audits [BBW]
Cattles has claims against PwC tied to the firm’s audits of its finances from 2005 through 2007 that could result in “substantial damages,” according to an outline of the case by Judge Henry Bernard Eder in London, who ruled yesterday on preliminary issues. The company said PwC’s audit led to a “gross misstatement” of the company’s bad debt. While an official complaint hasn’t yet been filed, Cattles was awarded some legal costs against PwC in an evidentiary dispute. Cattles claims groups of loans that were “ostensibly” set aside for debt collection were in reality just buckets for bad debt, Eder said in the ruling, which didn’t address the merits of the case. “Once the misstatements became clear, the group could not continue trading and became worthless.”

MF Global Goes Belly Up, So Where Was the Going Concern Opinion? [GOA]
Grumpies: “To answer the question, yes, we do think PwC probably should have issued a going concern opinion. There were plenty of breadcrumbs to reveal the cupboard was bare.”

Reznick Group Appoints Five New Principals [RG]
Adam Kleeman, Lucas Matesa, Marshall Phillips, Rick Suid, and Joseph Wallace all got their sports coats out for the occasion.

Graduate job applications up 140% at E&Y [Accountancy Age]
Ernst & Young has seen applications to its graduate and undergraduate placements rocket in the last year. Graduate job applications have increased 140% in a year, while undergraduate trainee schemes, which offer work experience at the firm, has also seen a frenzy of activity as submissions grew 215% compared to last year.

Fatty Foods Addictive as Cocaine in Studies [Bloomberg]
You’re all a bunch of junkies.

MF Global Collapses as Books Questioned [WSJ]
MF Global Holdings Ltd. collapsed into bankruptcy Monday when a potential buyer bolted over a discrepancy of hundreds of millions of dollars in the beleaguered securities firm’s books, people familiar with the matter said. U.S. regulators are investigating the discrepancy, which relates to money from customers that couldn’t be accounted for as MF Global raced to sell itself, according to people with knowledge of the probe. The probe is at an early stage, and it isn’t clear if the money is missing or if the inconsistencies relate to sloppy bookkeeping. The last-minute dealbreaker came just hours after negotiations led by MF Global Chief Executive Jon S. Corzine had concluded with a tentative agreement on a rescue.

Overstock.com (O.co): Insolvency Looming? [WCF]
This isn’t looking good: “At the end of its third quarter, the Overstock.com had $18.4 million of net working capital (current assets minus current liabilities). However, the company would have reported a mere $1.4 million of net working capital had it not played a shell game and window dressed its balance sheet during the third quarter. Apparently, the company wanted to avoid reporting dangerously low net working capital going into the fourth quarter, while at the same time it is trying to renegotiate terms of its Master Lease Agreement (sale leaseback) with U.S. Bank.”

Tax Breaks for Students [WSJ]
News you can use.

Perry Flat Tax Is Fool’s Gold for Conservatives [Bloomberg]
Perry’s plan is, in short, a flat tax in name only. And notwithstanding his campaign’s absurdly optimistic projections, it seems likely that it would result in much lower revenues than the current system.

A Close Look at the Perry Tax Plan [Economix/NYT]
And for another perspective: “Mr. Perry’s plan cannot be taken seriously. I don’t think it’s meant to be, at least by those of us who don’t plan on voting in Republican primaries. It’s just a signaling device, telling the Republican faithful that they can trust Mr. Perry on the tax issue. Whether the plan makes any sense as a matter of policy is irrelevant to its purpose, which is to win him the Republican nomination.”

IRS Roguery is Not a New Development [Tax Lawyer’s Blog]
You. Tax preparer. Enemy.

Monday Map: Soda Taxes by State [Tax Foundation]
Places where buying the world a Coke™ will cost you a little extra.

PwC Names Dietmar Ostermann as Global Automotive Advisory Leader [PwC]
Dietmar comes by way of…A.T. Kearney.

Corzine Races to Save Firm [WSJ]
Jon S. Corzine, the former New Jersey governor, raced over the weekend to find a buyer for MF Global Holdings Ltd. in an attempt to rescue the securities firm he now runs from a crisis partially of his own making. MF Global was nearing a deal late Sunday night to file for Chapter 11 bankruptcy protection as soon as Monday and sell assets to Interactive Brokers Group, said a person familiar with the matter. The tentative agreement, reached after a marathon weekend of negotiations, could end the short tenure for Mr. Corzine at MF Global.

MF Global: 99 Problems And Auut None [Forbes]
FM: “According to the latest proxy, MF Global spent almost $12 million on total fees to PwC last year. That’s pretty paltry for a firm with the issues and complexity MF Global has.”

U.S. Economy Revives as Consumers Still Spend [Bloomberg]
While household-sentiment measures are at levels typically observed during a recession, an increase in spending during the third quarter boosted growth to the highest level of the year, Commerce Department figures showed Oct. 27. The schism partly reflects consumer ire with the government’s failure to reduce 9.1 percent unemployment or stem rising deficits, said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management. “Emotionally based indicators are suspect,” Paulsen said. “There is a lot of anger out there. In a calmer time, these indicators might provide a better guide. Consumers are scared to death, but they are still spending.”

PWC Saw No Sign of FMS Accounting Errors, Reports Now Adjusted [Bloomberg]
The auditor said it had “no indication” of any mistakes in FMS’s 2010 financial statement, based on its examinations and the documents it received. “Significant” parts of FMS’s accounting have been outsourced, PWC said in the statement.

A Tax Bracket Divided Over a Plan to Pay More [NYT]
At a wine-and-cheese reception in his office here, Terry M. Barr, president of Samson Oil and Gas, made a pitch to industry executives to donate to the Republican Party of Colorado so that they could defeat President Obama and elect more Republicans at the federal, state and local levels. After his guests left, Mr. Barr offered a surprising postscript: He agrees with a proposal by Congressional Democrats to impose a surtax on income over $1 million a year. Republicans in Congress deride the proposal for a so-called millionaires’ tax as class warfare. But in an interview, Mr. Barr said, “Wealthy people in the U.S. should be paying more tax, and I’m one of them.”

More SEC Reports on IFRS Coming: Will they be Genuine Analysis or Just More Dithering? [AO]
Tom Selling: “The public interest and investors would be better served if the Staff were to finally acknowledge that IFRS is not clearly superior to U.S. GAAP; and, eight years after its report to Congress, the necessary conditions for principles-based standard setting to occur (especially at the IASB) are still not in place.”

For PricewaterhouseCoopers, China Accounting Scandals Not A Game Changer [Forbes]
PricewaterhouseCoopers, or PwC, won’t be leaving China anytime soon following a rash of accounting scandals on small and mid-cap mainland companies listed on the New York Stock Exchange. The company told Shanghai Daily on Monday that it intends to stick around and open up five new offices despite auditors like PwC getting caught up in the middle of ugly international class action lawsuits against Chinese firms for accounting fraud allegations.

Rolling back accounting fraud protections will kill, not create, jobs [WaPo]
The recently released interim report from the President’s Council on Jobs and Competitiveness is brimming with suggestions for ways to get Americans back to work. But it also contains provisions aimed at rolling back protections against accounting fraud, which actually could result in killing jobs. One proposal calls for weakening, at all but the nation’s very largest public companies, nearly 10-year-old rules targeting accounting fraud. That would be bad news for employees and investors in Washington area companies, since it is employees and investors who suffer most when executives cook the books.

Longing for the Days of the Big Eight [Reuters]
[A]s corporations become more global, the need for economies of scale may require fewer larger firms. Still, the right number is probably more than four.

A firewall to stop Europe’s crisis spreading [FT]
BO: “Given the scope of the challenge and the threat to the global economy, it is important for all of us that this strategy be implemented successfully – including building a credible firewall that prevents the crisis from spreaduropean banks, charting a sustainable path for Greece and tackling the structural issues at the heart of the current crisis. The European Union is America’s single largest economic partner and a critical anchor of the global economy. I am confident that Europe has the financial and economic capacity to meet this challenge, and the US will continue to support our European partners as they work to resolve this crisis.”

Taxes Remain Stumbling Block For Deficit Panel [WSJ]
House Speaker John Boehner (R., Ohio) acknowledged that the 12-member House-Senate Joint Select Committee on Deficit Reduction was still far from reaching an agreement, but he said he was keeping up the pressure on the panel not to give up. “I expect that it’s going to be very difficult to get to an outcome, but I am committed to getting to an outcome,” he said. “We’re into the really tough time and it is going to take a lot more work.”

Republicans put faith in radical tax plans [FT]
The US budget may be drowning in red ink, but that has only spurred Republican candidates to propose cuts in tax rates for individuals and companies as they compete for the right to challenge Barack Obama in the 2012 presidential election. Three candidates – Rick Perry, the Texas governor, Newt Gingrich, the former speaker, and Herman Cain, a businessman and radio host – have put forward radical plans for flat taxes. In the Reaganite tradition of supply-side economics, these candidates see their flatter tax proposals as both their main growth engines and a potential route to a balanced budget.

Consultant gets 10 years in massive accounting fraud at western Pa.’s defunct Le-Nature’s [AP]
Fifty-five-year-old Andrew Murin, of McMurray, was sentenced Thursday based on a June guilty plea to mail fraud in the scam that cost lenders, investors and vendors more than $650 million.

Exposing Auditors’ Work [Fraud Files]
Lately, there has been talk of more requirements for auditors: more disclosures, more discussion, more information on who is doing the audits. Would a narrative by the auditors add more meaning to audit reports?

Overstock’s “Likely” Breach of Debt Covenants [WCF]
Make no mistake, Sam Antar is enjoying this.

Zetas drug cartel ‘accountant’ detained [Telegraph]
Mexican marines detained alleged Zetas “accountant” Carmen del Consuelo Saenz two days ago in the Gulf coast state of Veracruz, along 10 other alleged Zetas members. Saenz, 29, was allegedly in charge of receiving proceeds from drug sales, pirated goods, kidnappings and extortions in five southern states of Mexico, said Navy spokesman Jose Luis Vergara. Saenz used the illicit proceeds to bribe authorities and meet the drug gang’s payroll, he said.

PwC appoints global head of tax [Accountancy Age]
Richard Stamm is your man.

EU Forges Greek Bond Deal [WSJ]
European leaders said they secured a deal to reduce Greece’s debt after they labored overnight and into Thursday morning to find agreement on what they had billed as a blockbuster package to stem the Continent’s debt crisis. French President Nicolas Sarkozy said after the marathon negotiating session that the leaders had reached agreement with private banks on a “voluntary” 50% reduction of Greece’s debt in the hands of private investors. He also said they had agreed to expand the firepower of the euro zone’s bailout vehicle, known as the European Financial Stability Facility, by four- or five-fold—suggesting it could provide guarantees for around €1 trillion, or about $1.4 trillion, of bonds issued by countries such as Spain and Italy.

Ruth Madoff Says Couple Tried Suicide in 2008 [NYT]
Mrs. Madoff said in an interview with The New York Times: “I don’t know whose idea it was, but we were both so saddened by everything that had happened. It was unthinkable to me: hate mail, phone calls, lawyers.” The situation was “just horrific,” she continued. “And I thought, ‘I just can’t, I can’t take this. I don’t know how I’ll ever get through this, nor do I want to.’ So we decided to do it.”

Decade-Old Accounting Regulation Becomes Popular Target on 2012 Campaign Trail [FoxNews]
Because some people just can’t let it go.

State Tax Haul Jumps 10.8% [WSJ]
States beset by budget travails and high national unemployment notched a double-digit rise in tax revenue in the second quarter, thanks in part to recession-era tax increases and the slowly recovering economy. State tax revenue climbed 10.8% during the quarter ended in June from the year-ago period, according to a report released Wednesday by the Nelson A. Rockefeller Institute of Government at the State University of New York. Preliminary data, also not adjusted for inflation, show growth continued in July and August, though at a slower pace, the Institute said. In 41 states that have reported for those two months, tax revenue was up 6.8% compared with the same two months in 2010. The growth was led by 9.8% gains in income taxes and 3.6% in sales taxes.

Bankers, Beware of Auditors Who Blow Off Their Regulator [Francine McKenna/Bank Think]
*cough*Deloitte*cough*

On the Job, Beauty Is More Than Skin-Deep [WSJ]
Don’t be ugly.

Eight Questions the WSJ Could Have Asked KPMG China [Silicon Hutong]
Including: “What does your “risk management” department do, exactly? In layman’s terms?”

Obama moves to ease student loan burdens [WaPo]
President Obama on Wednesday will announce a plan to allow college graduates to cap federal student loan repayments at 10 percent of discretionary income starting in January, two years before the cap was due to take effect under federal law. The accelerated “pay as you earn” program, which Obama will authorize through executive order, could benefit up to 1.6 million borrowers and reduce their payments by as much as a couple hundred dollars a month, administration officials said. All remaining debt on the federal len after 20 years — five years earlier than under current law.

Perry Calls His Flat Tax Proposal ‘Bold Reform’ [NYT]
The plan represents a gamble for Mr. Perry, who is trying to reinvigorate a once-high-flying campaign by capturing some of the energy Herman Cain generated with his flat tax plan and by drawing a sharply conservative contrast with Mitt Romney. But in proposing what he called “bold reform” that may trim Social Security and Medicare benefits for many, Mr. Perry is also advocating potentially sweeping changes in entitlement programs that may open him to new lines of attack from Republican rivals, all at a time when polling shows many Americans want to see higher — not lower — taxes on the wealthy.

Olympus chairman to step down [FT]
The chairman of Olympus, Tsuyoshi Kikukawa, is to leave the Japanese optical equipment company after coming under fire over large undisclosed payments made in relation to acquisitions while he was chief executive. Olympus has scheduled a news briefing for 5:30pm Tokyo time. A spokesman said the company planned to announce Mr Kikukawa’s departure but declined to give further details.

Gupta Surrenders to FBI [WSJ]
The 62-year-old Mr. Gupta surrendered to the Federal Bureau of Investigation Wednesday on criminal charges of leaking inside information to Galleon Group hedge fund founder Raj Rajaratnam. Mr. Rajaratnam this month was sentenced to 11 years in prison, the longest-ever for insider trading. If prosecutors are able to prove their case against him, Mr. Gupta would be by far the highest-ranking corporate executive to fall in an unprecedented push by the government to root out insider trading, which prosecutors have said they believe is rampant. Since late 2009, federal prosecutors in Manhattan have charged 55 individuals with insider trading, resulting in 51 convictions or guilty pleas.

IBM names Rometty as next chief executive [FT]
IBM has named Virginia Rometty to succeed Sam Palmisano as its chief executive from the start of next year, making her the first female leader in the 100-year history of the US computing giant and one of only a handful of women to head a large US corporation. Currently head of sales, marketing and strategy, Ms Rometty is also the first head of IBM not to have run part of its traditional hardware business. At one time she headed the business services unit that accounts for around a third of IBM’s total services division, but has otherwise spent her 30-year career at the company mainly in sales and marketing roles.

Jack Daniel’s distillery facing possible $3.5 million property tax increase [DMWT]
Who needs a drink?

My Tax and Spending Reform Plan [WSJ]
In addition to giving us a “choice” between a 20% flat rate or their current tax rate, Texas carnival barker Rihis: “ObamaCare, Dodd-Frank and Section 404 of Sarbanes-Oxley must be quickly repealed and, if necessary, replaced by market-oriented, common-sense measures.” Whatever that means.

Murdochs shunned in News Corp vote [FT]
Just 20 per cent of voting shareholders not aligned with News Corp’s founding family voted for James Murdoch to be re-elected, reflecting concern about the deputy chief operating officer’s response to the UK phone hacking scandal that scuppered the group’s bid for British Sky Broadcasting. He faces a separate re-election battle as chairman of BSkyB next month. Family votes saw James Murdoch re-elected with 65 per cent of all votes cast, but this was down from 89 per cent last year. Given the family’s holding, “a big protest vote would be anything over 20 per cent” against the board, Paul Hodgson of GovernanceMetrics International said before the figures were released.

Olympus chairman lashes out at ousted CEO [FT]
In perhaps the most personal attack, [Olympus Chairman Tsuyoshi Kikukawa] suggested that [Former President Michael] Woodford “did not like Japan” because he spent much of his time as president abroad. “At a time when he was imposing strict cost cuts on frontline employees, director MCW travelled around Europe and to his home [in the UK] by private jet,” he said.

Keynote Address: A Fresh Look at Auditing [PCAOB]
Jim Doty’s keynote from NASBA’s 104th Annual Meeting.

Audit Chief Faces China Risks [WSJ]
KPMG’s top auditor in China sounds an awful lot like a top auditor in the States.

Big 4 Audits: A Thing of the Past? [GOA]
The Grumpies are thinking about the future.

Fairfax neighbors head to court over unscooped dog poop [WaPo]
A dispute between neighbors in Fairfax County over that perennial suburban pet peeve — unscooped dog poop — has grown so big that the case is set to go to a jury Tuesday. A dog walker invested $1,200 in her defense, and a supposed eyewitness will testify. A photo of the offending pile will be admitted as evidence. The fluffy 19-pound Westie-bichon frise mix will stay home. The case is just one flash point in an increasingly sophisticated, expensive and acrimonious battle over dog waste in the Washington suburbs and beyond. Two Northern Virginia apartment complexes have signed on for PooPrints, a service that collects DNA samples from pooches, taking a “CSI”-style approach to find the culprits of unclaimed messes.

The Republican Idea of Tax Reform [Economix/NYT]
Bill Clinton, in his budget for fiscal year 1997, which was released in early 1996, projected a federal budget surplus by 2001. It turned out that the tax increases initiated by George H.W. Bush in 1990 and by Mr. Clinton in 1993, which were strenuously opposed by virtually all Republicans, did exactly what they were supposed to do and sharply reduced federal budget deficits. Nevertheless, Republican dogma insists that tax increases just fuel spending and never reduce the deficit. As the Republican tax guru Grover Norquist put it last week, when taxes are on the table there are no spending cuts. “When taxes are off the table, you get spending cuts,” he said. My friend Grover is factually wrong. Spending as a share of the gross domestic product fell after both the 1990 and 1993 budget deals, in large part because of tough budget controls that Republicans abandoned in 2002 so that they could cut taxes without restraint. And contrary to Mr. Norquist’s theory, the tax cuts of the George W. Bush years did not constrain spending, which rose as a share of the G.D.P. almost every year of his administration (as the raw data confirms).

IRS Reminds Workers They Can’t Demand Turning Off Speakerphone [Dow Jones]
The tax agency agreed to remind its employees that they can’t threaten to withhold telephone help from taxpayers using speakerphones, after the Taxpayer Advocacy Panel raised the issue in its 2010 annual report, released Monday. In one of 30 of the panel’s recommendations agreed to by the IRS, the tax agency conceded that the Internal Revenue Manual does not prohibit the use of speakerphones and will issue an alert reminding its employees who provide telephone help to taxpayers.

Swiss Banks May Pay Billions to U.S., Disclose Client Names [Bloomberg]
Swiss banks will likely settle a sweeping U.S. probe of offshore tax evasion by paying billions of dollars and handing over names of thousands of Americans who have secret accounts, according to two people familiar with the matter. U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG (CSGN), suspected of helping American clients hide money from the Internal Revenue Service, according to five people with knowledge of the talks who declined tause they are confidential.

Silvercorp says KPMG report shows books are clean [Reuters]
Anonymous short sellers had accused Silvercorp of inflating earnings and the size of its mineral resources, among other allegations, sending the company’s stock price as low as C$5.81 in September. The shares remain below an April high, but they have recovered to levels before the allegations were made public. The company, which operates silver mines in China, has denied all the allegations against it, describing them as part of a “short and distort” scheme. Silvercorp said the KPMG report showed its financial records to be substantially correct.

Olympus scandal: KPMG quit over Gyrus accounts [Telegraph]
Olympus has been in crisis since its former chief executive, Michael Woodford, revealed that $687m (£431m) in “fees” had been paid to two companies in the Cayman Islands during the purchase of Gyrus. Gyrus documents show that years before Mr Woodford’s revelations, accountants from KPMG flagged up “circumstances connected with our resignation that should be brought to the attention of the company’s members or creditors”.

Auditors In China: A Whole Lot of Posturing Going On [Forbes]
FM: “[A]ll this posturing is preposterous.”

Groupon Takes to the Road [WSJ]
The road show for the Chicago Internet firm’s upcoming initial public offering begins on Monday. In a roadshow, company executives try to convince mostly institutional investors such as mutual funds to buy a company’s shares. The roadshow for the daily deals company will focus on the Eastern seaboard the first week, with stops in New York on Monday, the Mid-Atlantic region on Tuesday, and Boston on Wednesday, according to an email reviewed by The Wall Street Journal that was sent Friday by an executive director of institutional equity sales at a bank to potential buyers of the shares. Then the show returns to New York on Thursday and Friday, the email says.

Perry to pin his hopes on ‘flat tax’ [FT]
Mr Perry, who has struggled to get his footing in the race for the Republican presidential nomination, is likely to argue that the flat tax is the best way to jolt the nation’s sluggish growth. Flat tax proponents say it would unleash private capital through a lower top tax rate and better incentives for savings and investment rather than consumption. The political case for the flat tax is its potential appeal to conservative primary and caucus voters, who are scheduled to kick off the voting in Iowa in little more than two months. The idea of abolishing the “progressive” tax system has been high on the wish list for many rightwing policymakers since the 1980s, but it has never caught on with mainstream voters.

Romney, Once a Critic, Hedges on Flat-Tax Plans [NYT]
As several leading Republican presidential candidates embrace a flat tax as a core campaign position, one contender stands out in not doing so: Mitt Romney, who has a long record of criticizing such plans and famously derided Steve Forbes’s 1996 proposal as a “tax cut for fat cats.” Lately, though, his tone has been more positive. “I love a flat tax,” he said in August. Flat-tax plans have come and gone before, and analysts note that they have tended to lose support once they come under scrutiny. But Mr. Romney’s support of the concept of a flat tax underscores the tightrope he is walking as taxes become a larger focus of the Republican presidential race and he faces rivals’ accusations of inconsistency on the issues.

Dennis Kozlowski Talks Jail, Pay [WSJ]
The former chief executive of Tyco International Ltd. was found guilty in 2005 of looting his employer and sentenced to as much as a quarter century behind bars. Now, he’s suing New York state to win work release and awaiting his first parole hearing in April. Meanwhile, Mr. Kozlowski looks out—across razor wire made by Tyco—at a world where the stumbling economy and scorn heaped on big business have a familiar feel.

Audit Flaws Revealed, at Long Last [NYT]
In theory, the board can put a firm out of business, but since the demise of Arthur Andersen reduced the Big Five to what some call the Final Four, there is general agreement that going to three would be unacceptable. So while the board can credibly threaten to close down a small firm that does a dozen or two audits each year, no such threat would be credible for Deloitte or one of the other three major accounting firms.

Groupon’s Loss Narrows, Spending Declines [WSJ]
As Groupon Inc. prepares for a roadshow next week to woo investors, the daily-deals site filed amended initial-public-offering papers that showed a narrower quarterly loss and a decline in its marketing spending. According to an amended S1 filing, Groupon narrowed its net loss for the third quarter to $10.6 million from $49 million in the same period a year earlier. The Chicago company’s third-quarter operating loss shrank to $239,000 from $56 million a year earlier.

Flat Tax Seen as Savings Booster [WSJ]
A consumption tax “has always been popular, but what makes the notion attractive in some circles now is that we’ve just been through a consumption bubble,” said Alvin Rabushka of the Hoover Institution, a co-author of the first major flat-tax proposal 30 years ago. “I think looking long-term, you’d like to have a healthy balance [of incentives] and a system that doesn’t discourage savings and investment.”

US Senate blocks key Obama jobs measure [FT]
US Senate Republicans and Democrats rejected each other’s economic stimulus bills on Thursday, underscoring their inability to craft a bipartisan solution on job creation before next year’s elections. All 47 Senate Republicans, joined by two of President Barack Obama’s fellow Democrats and one independent, stopped a key piece of Mr Obama’s $447bn economic stimulus plan.

IRS Raises Contribution Cap for 401(k) Plans [Bloomberg]
Taxpayers will be able to set aside an extra $500 in 401(k) plans and benefit from an additional $120,000 estate tax exemption in 2012, under cost-of-living adjustments announced by the Internal Revenue Service. The 401(k) contribution cap will be $17,000 in 2012, up from $16,500 this year. The 401(k) limits also affect contributions to similar accounts, including the 403(b) plans for school employees and nonprofit workers and the Thrift Savings Plan for federal employees.

Deloitte’s Quandary: Defy the S.E.C. or China [DealBook]
Not really much of a choice.

Perry Takes Up Flat-Tax Banner [WSJ]
The Texas governor said in a speech Wednesday to the Western Republican Leadership Conference in Las Vegas that he would lay out details of a flat-tax plan that “starts with scrapping the three million words of the current tax code, and starting over with something much simpler: a flat tax.”

Protests Show Capitalism ‘Nearly Broken’ [Bloomberg]
The protesters camping in London in support of the Occupy Wall Street dright and capitalism risks losing its “license to operate,” Generation Investment Management LLP’s David Blood said. Blood, who worked at Goldman Sachs Group Inc. (GS) for 18 years before starting fund manager Generation with former U.S. Vice President Al Gore in 2004, said the protesters’ message is that the financial system is “broken” and “unfair.”

Groupon Discounts IPO [WSJ]
The Chicago company and its bankers will begin meeting with investors in the next few days to sell them on a deal that values the daily deals pioneer at less than $12 billion, according to people familiar with the matter. While that would still mark one of the biggest Internet IPOs since Google Inc. in 2004, it is well below the valuations that were bandied about when the company filed to go public in June.

JetBlue Falls After Finance Chief Quits Week Before Earnings [BBW]
JetBlue Airways Corp. fell the most in two weeks after Chief Financial Officer Ed Barnes resigned ahead of the carrier’s earnings report. Barnes’s departure, effective immediately, was announced after the stock market closed yesterday. The resignation was a “personal decision” that had been planned for some time, said Mateo Lleras, a spokesman for New York-based JetBlue.

Certified Management Accountant Exam Offered in Chinese [AT]
“For nearly 40 years, the CMA certification program has been the globally-recognized credential for accountants and financial professionals in business, through an exam assessment, continuing education, and compliance with the highest ethical standards,” said Dennis Whitney, ICMA senior vice president, in a statement. “Following the success of the revised two-part CMA exam curriculum in English, we are pleased to offer the exam in Simplified Chinese.”

Citigroup to Pay $285 Million to Settle Fraud Charges [WSJ]
Wall Street’s total price tag on settlements with U.S. securities regulators for allegedly misleading investors about mortgage bonds churned out ahead of the financial crisis surged past $1 billion with a deal by Citigroup Inc. to pay $285 million. he New York company agreed to the payment to end civil-fraud charges by the Securities and Exchange Commission related to a 2007 deal called Class V Funding III. The SEC claimed Citigroup sold slices of the $1 billion mortgage-bond deal without disclosing to investors that the bank was shorting $500 million of the deal, or betting its assets would lose value.

CPA Horizons 2025: A Road Map for the Future [JofA]
Good news: you won’t be extinct.

Is Class Warfare Justified? [Tax.com/Martin Sullivan]
Maybe!

Grover Norquist defends no-tax pledge [Politico]
Aka: “Dog Bites Man.”

Morgan Stanley Swings to Profit [WSJ]
Morgan Stanley swung to a third-quarter profit, helped by a large accounting gain that stemmed from declines in the value of its debt. The Wall Street bank posted profit of $2.15 billion, or $1.15 a share, compared with a loss of $91 million, or 7 cents a share a year ago. Revenues rose 46% to $9.89 billion from $6.78 billion a year ago. Excluding a gain of $3.4 billion from a debt-valuation adjustment, Morgan Stanley earned 2 cents per share.

Now Let Us Say Certain Things About DVA [DB]
Matt Levine explains how the banks use bizarro accounting to their advantage.

A Taxing Debate: The Mortgage-Interest Deduction [Bloomberg]
The mortgage-interest deduction may be your favorite tax break, but be aware that it has some impressive enemies. The fiscal commissions of two different Presidents proposed eliminating it, first in 2005 and then in 2010. There’s also a steady stream of research from such places as the London School of Economics and the Brookings Institution arguing that the deduction doesn’t boost homeownership, but instead provides incentives for wealthier Americans to buy big houses and take on more debt. Nevertheless, the mortgage-interest tax deduction survives, fortified in Washington by strong housing industry support and its presumed popularity with voters. Now, according to a recent Bloomberg Poll, a growing number of Americans may be willing to end the mortgage tax deduction — as long as they get something in return.

Cain 9-9-9 Plan Challenged as Raising Taxes for Lower Income [Bloomberg]
The proposal would reduce the tax bill for almost 95 percent of Americans with cash income exceeding $1 million, according to the analysis released yesterday by the nonpartisan Tax Policy Center in Washington. Almost 70 percent of taxpayers with cash income between $200,000 and $500,000 would pay less in taxes, the analysis said. Meanwhile, about 95 percent of Americans with cash income between $30,000 and $40,000 would pay more in taxes. This analysis presumes the 2001 and 2003 tax cuts would be permanently extended. The 9-9-9 plan “substantially increases the tax burden on low- and middle-income families and it substantially cuts the tax burden on the highest-income taxpayers,” said Eric Toder, the Tax Policy Center’s co-director. “Most taxpayers would experience an increase under this plan.”

Olympus Defends Fees Paid to Advisers [NYT]
Last week, Olympus ousted its president, Michael C. Woodford, citing a management culture clash. Striking back, Mr. Woodford on Monday accused the company of wrongdoing, saying that it had paid $687 million, or a third of the purchase price, to two advisory companies related to its acquisition of the Gyrus Group in 2008. Tsuyoshi Kikukawa, the Olympus chairman, told the Nikkei newspaper that the actual amount was about $391 million, and the company issued a statement denying that the payments broke accounting rules. “Investors expected that management would deny everything but in fact the chairman started to admit things,” Yuuki Sakurai, president at Fukoku Capital Management, said in a phone interview. “Only the numbers are different. They admitted the payment even though several years ago they didn’t disclose it. It makes you wonder if there’s more out there.”

The PCAOB Wants to Name Audit Engagement Partners: Would Its “Red A” Really Matter? [Re:Balance]
Jim Peterson: “It’s a bogus issue, and not worth the distraction from serious matters.”

The PCAOB Should Name Names – All of Them [Accounting Onion]
Y la cebolla: “If the PCAOB truly wants the naming of responsible engagement partners to have information and deterrent value, it needs to be more forthcoming itself about the results of its inspections, and to publish the information in a timely manner.”

Groupon planning IPO launch for next week–sources [Reuters]
Groupon Inc is pushing ahead with plans to go public in the face of a volatile equity market, a recent executive departure and questions about its accounting and financial disclosures, sources said on Tuesday. Groupon, the largest daily deal company, is planning to launch a roadshow for its initial public offering next week, on Monday or Tuesday, three sources familiar with the situation said. The IPO is expected to value the Chicago-based company at over $10 billion, likely in the range of $11 billion to $12 billion, two of the sources said.

AICPA Prepares for Canadian CPA Expansion [AT]
The American Institute of CPAs has been holding discussions with the Canadian Institute of Chartered Accountants and CMA Canada on bringing the CPA designation up north and combining it with the CA and CMA designations. At the AICPA’s Fall Meeting of Council in Phoenix on Tuesday, AICPA president and CEO Barry Melancon described the Institute’s international expansion plans, including how the CPA Exam will soon be administered in South America, starting with Brazil.

Bank of America swings to $6.2bn profit [FT]
Bank of America reported a third-quarter net profit of $6.2bn but the results were flattered hugely by accounting gains and its sales of shares in China Construction Bank. Stripping out a litany of exceptional items, from a $3.6bn gain due to the CCB stake sale to a $4.5bn boost from an accounting rule that allows banks to book a profit on the falling value of their own debt, BofA’s businesses produced a loss.

Paul Seeks $1 Trillion Spending Cuts [WSJ]
Mr. Paul, a longtime Texas congressman, said he would close the departments of Education, Energy, Commerce, Interior and Housing and Urban Development, as part of a broader plan to cut federal spending. The federal work force would be cut by 10%. Mr. Paul also called for stopping foreign aid and “ending foreign wars.” His “Plan to Restore America” would end the estate tax and taxes on personal savings, “allowing families to build a nest egg.” He would extend tax cuts on personal income, capital gains and dividends that were enacted under former President George W. Bush.

Corporate leaders say they understand protests [FT]
“I understand some of the angst and the anger. This downturn has been too long, unemployment is too high, and people are hurting. We get that,” said John Stumpf, Wells Fargo chief executive, on a conference call announcing that the nation’s largest bank by market capitalisation had recorded a record $4.1bn quarterly profit.

The Tax Reform Act of 1986: Should We Do It Again? [Economix/NYT]
Republican tax reformers of the 1980s, such as Representative Jack Kemp of New York and Senator Bob Kasten of Wisconsin, were willing to put specific tax preferences on the table for elimination and take the heat for doing so. Reagan built on their efforts and put forward a very detailed plan for tax reform in May 1985, based on several years of work by the Treasury Department, that identified a long list of tax provisions needing pruning from the tax code, along with supporting analysis and documentation. Today, Republicans like Mr. Cain put most of their efforts into devising catchy slogans and almost none into providing details of their tax proposals.

The Young Are Happy at Work [WSJ]
ounger workers tend to be happier with their employers than their older counterparts—but they are also more likely to be looking for an exit. Those attitudes—culled from a recent survey by consulting firm Mercer of nearly 30,000 workers from a variety of industries world-wide—might seem contradictory, but they do make sense, says Bruce Tulgan, founder of Rainmaker Thinking Inc., a workplace consulting company. Twenty-somethings may see a job in a “short-term, transactional way,” he says. “They don’t necessarily think ‘Where do I fit in with this employer?’ “

Bad Math Hurts Cain’s Good Tax Intentions [Bloomberg]
Not to worry: There’s also no reason to think the federal government would ever enact Cain’s plan. Even if, per impossibile, Cain were elected president, Congress isn’t going to tell senior citizens that, after having paid taxes on income all their lives, they will now incur extra sales taxes when they spend the money. It’s not going to raise taxes on millions of poor and middle-class people.

U.S. bank accounting rule has big earnings impact [Reuters]
“This is the most vilified accounting rule I’ve ever seen. It’s amazing how universally despised it is,” said Robert Willens, author of the Willens Report, which analyzes corporate accounting and tax matters.

IRS chief: Budget cuts would hurt U.S., taxpayers [WaPo]
Shulman said that because the IRS workforce accounts for 92 percent of enforcement spending, slashing the IRS budget by the amounts being considered would force substantial cutbacks in front-line IRS staff. The federal government would lose about $4 billion in annual revenue, he said, “or seven times the reduction in IRS budget.”