Category: ANR

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current tax rate, Texas carnival barker Rihis: “ObamaCare, Dodd-Frank and Section 404 of Sarbanes-Oxley must be quickly repealed and, if necessary, replaced by market-oriented, common-sense measures.”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.”

The Shadow of Enron Still Lingers [WSJ]
The beginning of the end for Enron Corp. came exactly a decade ago. Yet the energy giant’s colossal collapse casts a long shadow over the government’s efforts to punish wrongdoing during the financial crisis. In October 2001, the highflying Houston company jolted investors with a big loss. Less than two months later, Enron was bankrupt, and the scandal led to 42 civil enforcement actions by securities regulators and criminal charges against 33 people and the company’s auditor, according to a tally by law firm Davis Polk & Wardwell LLP. More than a dozen peoFormer Enron President Jeffrey Skilling, now 57 years old, is serving a 24-year sentence in a Colorado federal prison following his 2006 fraud conviction. Some people who helped untangle the Enron mess say the results show how regulators and prosecutors are coming up short as they work on cases tied to the financial crisis. So far, no high-profile executive has been sent to prison for crisis-related wrongdoing.

Lessons From Auditor’s Fall [WSJ]
Joseph F. Berardino says he “turned the page” on an accounting career that lasted more than 30 years. “Fate has given me an opportunity to do something different.” Mr. Berardino was chief executive of Andersen Worldwide, the parent company of Arthur Andersen, when the accounting firm was hit with a criminal charge in March 2002. He soon resigned, watching from the outside as a jury convicted Arthur Andersen of obstructing justice by shredding documents relating to its botched audit of Enron. The conviction meant Arthur Andersen was banned from auditing public companies. It was a death sentence. By the time the Supreme Court overturned the conviction in 2005, the 89-year-old firm was essentially out of business. At its peak, the firm employed 28,000 people around the world. “It’s left us with just four big accountancy firms, and I don’t know anyone these days who thinks that’s a good outcome,” Mr. Berardino says now.

Cain defends ‘9-9-9’ tax overhaul plan [WaPo]
Republican presidential candidate Herman Cain acknowledged Sunday that some Americans would see a tax increase under his “9-9-9” plan, but he insisted that “most people will pay less” under his proposal to overhaul the country’s tax code.

Zynga’s Profits Get Zyngier [GOA]
The Grumpies take on Farmville: “Zynga, Inc. filed another amendment to its registration statement. The fourth-amended S-1 for Zynga involves a change in the revenue recognition, which fortuitously turns a semi-annual loss into a semi-annual profit. Ain’t accounting great!”

Accounting Gain Boosts Citigroup Profit [WSJ]
Citigroup booked a $1.9 billion gain tied to a change in the valuation of its own debt, and continued improvement in losses from soured loans allowed the bank to reduce its loan-loss reserve by $1.4 billion. Even without the accounting gain, Citigroup’s $3.74 billion profit exceeded analysts’ expectations.

How California Was Diminished by 1978 Tax Revolt [Bloomberg]
California voters approved Proposition 13 to rein in property taxes that had doubled in 10 years. More than three decades later, that rebellion has mortgaged the state’s future, saddling it with the nation’s highest debt and lowest credit rating. The measure led to reductions that dropped per-student school spending from seventh to 29th nationally, prompted cities to pursue sprawling retail development to compensate for lost revenue, and pushed the state into budget gridlock, including a $705 million revenue shortfall announced Oct. 10, by requiring two-thirds approval for any tax increase. “Proposition 13 set up an unfair and dysfunctional two- tiered system of property taxes,” said Kevin Starr, a history professor at the University of Southern California and the author of a series of books on the state. “It choked off a source of revenue, and the lack of that revenue has brought California to the edge.”

Olympus Adviser Payments Should Be Probed, PWC Report Says [BBW]
Olympus Corp. may face regulatory and legal scrutiny because of payments made to advisers in a 2008 transaction, according to a PricewaterhouseCoopers report commissioned by ousted president Michael C. Woodford. Potential offenses include false accounting, financial assistance and breaches of duties by the board, according to an Oct. 11 report that Woodford provided to Bloomberg News. Chairman Tsuyoshi Kikukawa said at an Oct. 14 press conference that the board fired Woodford, a 30-year veteran of the Japanese company, because he “wouldn’t listen” to warnings from Kikukawa. The British executive, who is now back in the U.K., said he was fired after he challenged the transactions.

‘Capitalists of the World Unite!’ [WSJ]
You don’t have to be camped out with the protesters to be angry at Wall Street. Contrary to what you may hear, actual capitalists—those providing capital—get a raw deal down on the Street of Shame.

How the Taxpayer Protection Pledge helps push tax reform [WaPo]
Red rover, red rover, send Grover right over: “The 238 members of the House of Representatives and the 41 senators who have signed the Taxpayer Protection Pledge to their constituents stand ready to vote for pro-growth, revenue-neutral tax reform that simplifies the tax code and brings rates down for all citizens and businesses. The pledge is a barrier to tax increases. And that protection makes real tax reform possible today, just as it did in 1986.”

Cain Plan’s Reagan-Era Roots [WSJ]
Herman Cain’s “9-9-9” plan might have been called the “Optimal Tax.” The Republican presidential candidate’s economic adviser, Rich Lowrie, thought the plan’s broad sweep and ultra-low 9% rates made it an ideal tool to revamp the tax code and encourage growth. Mr. Cain liked the idea, but not the name Mr Lowrie came up with. “We can’t call it that,” Mr. Cain said during a cab ride through Nashville in July, according to Mr. Lowrie. Instead, the former pizza-chain executive, tapping his instinct for marketing, concluded: “We’re just going to call it what it is: 9-9-9.” (“What kind of nerd am I?” Mr. Lowrie says now.)

Can Tax Cuts Pay for Themselves? [NYT]
Can tax cuts “pay for themselves,” inducing so much additional economic growth that government revenue actually increases, rather than decreases? The evidence clearly says no. Nevertheless, a version of this idea, under the guise of “dynamic scoring,” has apparently surfaced in the supercommittee charged with deficit reduction — the joint Congressional committee with 12 members. Dynamic scoring sounds technical or perhaps even scientific, but here the argument means simply that any pro-growth effect of tax cuts should be stressed when assessing potential policy changes (e.g., reforming the tax code). For anyone seriously concerned with fiscal responsibility, this is a dangerous notion.

Bethenny Frankel’s $120 Million Skinnygirl Lie That Wasn’t [Fraud Files]
Tracy Coenen debunks a HuffPo wannabe debunker.

TIGTA: 10,300 Businesses (Not Projected 25,000) Paid 10% ObamaCare Tanning Tax [TaxProf]
New Jersey, rejoice!

Tax Holiday Backers Emphasize Big Picture [Bloomberg]
Faced with criticism that companies didn’t use proceeds of a 2004 tax holiday to create jobs directly, advocates for repeating the policy are emphasizing the indirect economic effects of repatriating more than $1 trillion. Whether the money is used for hiring or stock buybacks, “I would much rather have their foreign earnings here rather than in, say, France,” said Kenneth Kies, a tax lobbyist at the Federal Policy Group in Washington whose clients include Microsoft Corp. (MSFT) and Pfizer Inc. Those companies, along with Apple Inc., Google Inc., and Qualcomm Inc., are part of a coalition urging Congress to temporarily reduce the tax rate on profits held overseas. They want a repeat of a 2004 law that let companies pay 5.25 percent, instead of 35 percent, when they bring that cash to the U.S.

PwC has earned £400m from Lehman Brothers so far [Telegraph]
In total, the accountancy firm has billed Lehman Brothers International (Europe) £403m and still has about 250 staff working on the complex resolution of the bank. This fee does not take into account the cost of continuing to pay 495 former Lehman Brothers staff as well as contractors who are helping with the winding up work. In the six months to the end of June alone the payroll bill came to £33m. Completing the work is expected to take at least 10 years, though the costs are expected to fall as the main parts of the administration are completed and the number of staff required to work on the project falls. An application will be made to the UK High Court next month to extend the administration period for a further five years.

ICAEW: Pass/fail audit report is best [Accountancy Age]
Auditors’ Reporting model should not be extended to disclose company information that is not already in the public domain, the ICAEW has argued. US regulator the PCAOB has proposed extending the audit report template to offer investors more detail on risks and business models, but the ICAEW has warned if management has not disclosed the information, the auditor should not do so.

Buffett’s Son Defends Occupy Wall Street [Bloomberg]
“I think it takes that to make things happen sometimes,” Howard Buffett, 56, said of the demonstrations in an interview yesterday in Des Moines, Iowa. Over the past 15 years, “we saw large corporations really screw people.”

Oversight board proposes plan to make accountants more accountable [WaPo]
Auditors are supposed shareholders, but from Enron and WorldCom to the Wall Street meltdown of 2008, they have often been criticized for not barking. They are hired and paid by the companies they audit, and policymakers have struggled for decades to strengthen incentives for them to stand up to corporate management when appropriate.

With Just Three 9s, Cain Refigured Math for Taxes [NYT]
Mr. Cain, a former pizza chain chief executive, wanted a proposal to jolt the economy and give his candidacy some definition. “I said, ‘The first fundamental, guys, is we have to throw out the tax code,’ ” Mr. Cain said Wednesday in an interview. “How do we come up with a bolder plan?” he pressed two of his close advisers. From that exchange emerged the plan that Mr. Cain calls 9-9-9: a flat 9 percent individual income tax rate, a 9 percent corporate tax rate and a 9 percent national sales tax. He has uttered the triple digits repeatedly, metronome-like, in speeches and debates, until they have acquired the catchy power of a brand.

JPMorgan Earnings Fall Less Than Expected on Accounting Change [Bloomberg]
JPMorgan would have reported a loss for its investment bank without the debt-valuation adjustment, which added 29 cents a share, under U.S. accounting rules allowed when the market value of a company’s liabilities declines. Chief Executive Officer Jamie Dimon, 55, said in the statement that the gain “does not relate to the underlying operations of the company,” which suffered from a 13 percent decline in investment-banking revenue from the prior quarter.

Buffett Builds His Tax-the-Rich Case [WSJ]
The biggest mystery is the nearly $23 million gap between Mr. Buffett’s adjusted gross income and his taxable income. Without having his tax return it is impossible to know the reason for the gap for sure, tax experts say. One possibility for the gap is that he made large charitable contributions, itemized deductions that are subtracted from adjusted gross income. Another possible element is interest expense. Mr. Buffett is known for not selling investments but rather borrowing money against them. To the extent that he has investment income, any interest paid on such loans would be deductible.

‘Buffett Rule’ May Be Broken by 25% of Millionaire Taxpayers, Study Finds [Bloomberg]
Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million “moderate-income taxpayers,” representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7. The findings put the U.S. tax system in conflict with the so-called Buffett Rule, which says households making more than $1 million annually shouldn’t pay a smaller share of their income in taxes than middle class families, says the report, which analyzed 2006 Internal Revenue Service data.

IRS Auditing How Google Shifted Profits Offshore to Avoid Taxes [BBW]
The agency is bringing more than typical scrutiny to how the company valued software rights and other intellectual property it licensed abroad, said the person, who requested anonymity because the audit isn’t public. The IRS has requested information from Google about its offshore deals after three acquisitions, including its $1.65 billion purchase of YouTube, the person said. The transfer overseas of these kinds of rights rights has enabled Google to attribute earnings to foreign units that pay lower taxes, Bloomberg News reported a year ago.

No. 1 Financial-Strength Ranking Spells Doom [Bloomberg]
Jonathan Weil: “Less than three months ago the European Banking Authority said Dexia SA (DEXB) had passed its so- called stress test with ease. The French-Belgian lender’s July 15 news release carried this headline: “2011 EU-wide Stress Test Results: No Need for Dexia to Raise Additional Capital.” Then last weekend, 86 days after getting its clean bill of health, Dexia took a government bailout to avoid collapsing. Nobody was surprised this happened. Nor should anyone have been.”

Cain ‘9-9-9’ Tax Plan Captures Debate Spotlight as Perry Recedes [Bloomberg]
“9-9-9 will pass,” the former Godfather’s Pizza chief executive said, “because it has been well-studied and well- developed. It starts with — unlike your proposals — throwing out the current tax code. Continuing to pivot off the current tax code is not going to boost this economy.” Other Republican candidates criticized or ridiculed the idea. “I thought it was the price of a pizza when I first heard it,” former Utah Governor Jon Huntsman Jr. said.

Cain: ‘The problem with that analysis ict’ [WaPo]
Cain couldn’t seem to answer any debate questions without at least mentioning his tax code overhaul plan, which would include a flat nine percent tax on businesses, a nine percent tax on individuals and a nine percent national sales tax. Bloomberg’s Julianna Goldman, one of the debate’s co-moderators, said Bloomberg’s analysis found the plan would not be revenue neutral. Instead, the media company found that it would actually raise less money than the current tax code. Cain responded with what is sure to become a useful catchphrase throughout the rest of the primary season. Cain said: “The problem with that analysis is that it is incorrect.”

NY judge: Home confinement in Arthur Andersen case [AP]
A former managing partner at the Arthur Andersen accounting firm was ordered Tuesday to serve three months of home confinement after admitting he engaged in insider trading. U.S. District Judge Robert Patterson praised the good deeds H. Clayton Peterson has done as he decided not to impose the yearlong prison sentence Peterson, 65, had agreed to during his guilty plea. Peterson, of Denver, was awarded the Bronze Star for his service in Vietnam. Defense attorney Steven Glaser had argued for leniency, citing Peterson’s work on behalf of adopted children and efforts to help find employment for 600 Arthur Andersen employees who lost jobs when the Chicago-based company closed.

Why Do Accounting Academics Blog Less Than Other Academics? [Accounting Onion]
Tom Selling would like to know. He has a theory but would entertain others.

Financial Statement Fraud: How It Is Done [Fraud Files]
Tracy Coenen: “One of the most innocent-sounding terms used to describe financial statement fraud is “earnings management.” Such a phrase minimizes the seriousness of the crime. “Management” almost makes it sound like something good! But earnings management isn’t a noble effort. It is, in fact, financial statement fraud. The degree and seriousness can vary, but it is fraud nonetheless. It is the purposeful manipulation of account balances in order to make the financial statements conform to some predetermined template.”

For Funds, a Groupon Deal Could Disappoint [WSJ]
When four well-known U.S. mutual funds invested $450 million in Groupon Inc. last December, it looked as though they might reap a windfall when the online discount-deal service went public. Now, however, expectations that the funds might triple their money or more have come back to earth. And current estimates of the company’s value suggest some funds may find themselves marking down the value of their holdings in the Chicago online coupon company.

IRS Employees Charged $80 Million on Credit Cards [AT]
The IRS provides credit cards to some of its employees to make purchases of under $3,000. The purchases are supposed to be used for low-cost items such as office supplies and training. The Federal Acquisition Regulation prohibits splitting high-cost procurements into multiple credit card purchases and requires, whenever possible, the use of existing contracts. Cardholders are also required to seek approval for purchases and verify that funding is available prior to using the credit cards. However, the TIGTA inspectors found 2,955 purchases that were potentially split into two or more transactions to circumvent micro-purchase limits; and purchases made from improper sources.

Report: Repatriation Tax Holiday a ‘Failed’ Policy [WSJ]
The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending, according to report from the Democratic staff of the Senate Permanent Subcommittee on Investigations released Monday night. The report warned against repeating the tax break, calling the 2004 effort “a failed tax policy” that cost the U.S. Treasury $3.3 billion in estimated lost revenues over 10 years and led to U.S. companies directing more funds offshoretionals often defer bringing back profits earned abroad to avoid paying U.S. taxes on them.

Sky China shares plunge in Singapore after auditor quits [Reuters]
Shares of Singaporelisted Sky China Petroleum Services Ltd slumped as much as 32 percent to a record low on Tuesday after the company said its auditors, Ernst & Young LLP, had resigned. This is the latest in a string of auditor resignations that have hit Chinese stocks listed in Singapore and the United States, sending investors running.

Protest Gets Green Light [WSJ]
Mayor Michael Bloomberg said Monday the city would allow an anti-corporate protest to remain in a Lower Manhattan park indefinitely, his strongest affirmation that authorities would tolerate the demonstrations—as long as they remained law-abiding. “The bottom line is—people want to express themselves. And as long as they obey the laws, we’ll allow them to,” said Mr. Bloomberg as he prepared to march in the Columbus Day Parade on Fifth Avenue. “If they break the laws, then we’re going to do what we’re supposed to do: enforce the laws.”

Call for News Corp vote against Murdochs [FT]
News Corp faced intensifying pressure for corporate governance changes on Monday as the biggest investor advisory group in the US recommended shareholders vote against the re-election of 13 of the media company’s 15 directors, including Rupert Murdoch, chairman and chief executive. The ISS advisory group said that the phone-hacking scandal at News Corp’s London-based newspaper group had “laid bare a striking lack of stewardship and failure of independence” by the board that had led to enormous financial and reputational costs to shareholders.

Taxing Millionaires Casts Obama as ‘Warrior’ for Middle Class Americans [Bloomberg]
Democrats have turned to an agenda that Republicans are calling class warfare, as President Barack Obama presses a “Buffett Rule” to tax the rich, Senate Democrats offer a millionaires’ tax instead and party leaders fulminate against Bank of America’s $5 debit-card service fee. Campaigning for re-election, Obama welcomes the charge. “Then guess what? I’m a warrior for the middle class,” he declared Sept. 22, standing at a Cincinnati bridge linking the home states of the Republican leaders of the House and Senate and setting a new course for his own party.

NBA’s First Two Weeks of Season Canceled [WSJ]
NBA Commissioner David Stern canceled the first two weeks of the season after two straight days of last-ditch negotiating sessions failed to resolve the labor dispute. Mr. Stern said both sides were “very far apart on virtually all issues….We just have a gulf that separates us.” The cancellation came after a seven-hour meeting at a Manhattan hotel on Monday. There are no further meetings scheduled and no timetable for when more games could be axed. Mr. Stern said that any financial losses incurred in the stretch will be factored in as negotiations move forward. The league has said it stands to lose hundreds of millions of dollars.

At Long Last, Facebook Releases an iPad App [Bits/NYT]
Trite status updates including “Loving this fall weather!” coming to a tablet near you.

They fuck you up, accountants [AccMan]
Indeed they do.

Ernst & Young employees get dirty, entertain kids at annual day of service [WaPo]
“I came home exhausted and filthy,” said Kevin Virostek, Ernst & Young’s Greater Washington managing partner. “But I never had a better day at Ernst & Young.”

Quarter of KPMG new partners are women [Accountancy Age]
Quite ironic that the article doesn’t quote any women.

Corporate audit fees up? Beware of trouble ahead [Reuters]
A high or rising audit fee can indicate one of two things, experts say. Either the auditor is charging a risk premium, aiming to cover future legal costs to them of something going awry, or they may just be doing more work on the audit, digging into areas where results are uncertain. The studies’ findings come at a moment when regulators are considering requiring auditors to give out even more information. A proposal under consideration by the U.S. Public Company Accounting Oversight Board might have auditors disclosing more than the current minimal thumbs up or down. seem to be telling a valuable story.

U.S. Corporate Profit Rebound Loses Steam [Bloomberg]
Earnings per share for the Standard & Poor’s 500, excluding financial companies, rose 14 percent in the third quarter, the smallest gain since the end of 2009, analysts’ estimates compiled by Bloomberg show. That compares with 19 percent in the second quarter and 20 percent in the first. Analysts have begun reducing forecasts for the current quarter and beyond. S&P 500 futures rose today, indicating the index will extend last week’s rally.

Judge puts brakes on SEC’s Deloitte case [Reuters]
A federal judge on Friday put the brakes on the government’s attempt to quickly get documents related to possible accounting fraud at Chinese companies listed on U.S. stock exchanges. U.S. Magistrate Judge Deborah Robinson questioned whether she could force a Chinese unit of accounting firm Deloitte & Touche to hand over records to the U.S. Securities and Exchange Commission. In September the SEC asked the court to enforce a subpoena it sent to Deloitte seeking information about its Chinese unit’s audits of Longtop Financial Technologies Ltd, a Chinese company under investigation by the SEC.

Qwikster Is Gonester: Netflix Kills Its DVD-Only Business Before Launch [ATD]
While Netflix had to use some strained logic to explain its decision last month, this one is straightforward: It’s not going to force customers to use two different services to rent DVDs and streaming video, because customers hated that idea.

Surrey accountant completes two-thirds of run across US [BBC]
A Surrey accountant aiming to run 3,080 miles (4,957km) across the US to raise £10,000 for Help for Heroes is about two-thirds of the way into his route. Chris Finill, 52, of Cranleigh, has been running about 40 miles (64km) a day since he left San Francisco with athlete Steve Pope on 17 August. The pair, who plan to get to New York by 6 November for the city’s marathon, have just run through Iowa. They said gravel surfaces made recent runs a “nightmare” in a Twitter post.

Accountants Outpace CPAs in Job Listings [CPA Trendlines]
This doesn’t mean you can stop studying for the CPA.

Consistency in Accounting and Legal Discourses: The Overtime Cases [GOA]
Grumpies: “For several years battles have raged in several courtrooms concerning whether accounting firms have a legal obligation to pay junior accountants overtime. We are sympathetic to the position of the accounting firms, but worry about the soundness of their legal reasoning and conclusions. Do accounting firms have to be consistent in different domains? For example, does the logic in legal briefs and oral arguments have to be congruent with ethical principles and auditing standards?”

Practitioners Raise Concerns About Fingerprinting Proposal at IRS Hearing [JofA]
“We have serious concerns regarding the level of burden that the user fee regulations will place on CPA firms, particularly small and medium-size CPA firms,” AICPA Tax Executive Committee Chair Patricia Thompson, CPA, told the IRS panel. According to IRS estimates, 70% to 80% of those affected by the fees are operating as or employed by small entities. Thompson’s testimony focused on the fingerprinting requirement for nonsigning staff working under the supervision of a CPA, and she said the IRS should consider an alternative that would allow CPA firms to use a consumer reporting agency instead. Under that scenario, the costs per applicant would be significantly below what the IRS is likely to charge, and less burdensome to implement ,Thompson said.

Cain’s ‘9-9-9’ tax reform plan under fire from both left and right [OTM/The Hill]
Cain’s so-called “9-9-9” plan has liberals and tax analysts worried that the plan would not take in enough revenue, and that it would cause lower- and middle-income families to pay more. But conservatives have a different concern – that Cain’s plan to install a 9 percent national sales tax, paired with income and corporate taxes at that same rate, would give Democrats a brand new tax stream to try to squeeze out more revenue.