Category: KPMG

KPMG Rolls the Dice, Will be the Next Auditor of Overstock.com

Thumbnail image for 200px-KPMG.svg.pngBut you already knew that was going to be the case. Back when we asked you to vote on which firm would be the next firm fired engaged by Overstock, over 42% of you said it would be KPMG.

This news comes despite reservations expressed by at least one reader who, at the time, had this commenlockquote>I for one think it is sad that such a high percentage of survey responders think KPMG will pick up OSTK. I hope from a public opinion and liability standpoint that KPMG will resist the urge to add yet another high risk client to its listing and cause further damage its reputation.

Sorry, dear reader but apparently the high profile cat fight between the company and Grant Thornton wasn’t enough to scare KPMG off. Not even the very public revelation of Patsy’s creepy-ass stalking of Overstock critics in the financial media and blogosphere caused the KPMG partners in SLC to turn this client down.

Oh, and not to mention a management team who thought that filing unreviewed 10-Q was the best course of action. But as white-collar crime expert (and self-proclaimed crook) Sam Antar told us:

KPMG is taking a client with no management integrity and is well advised to study SAS No. 99 about “Consideration of Fraud in a Financial Statement Audit” regarding the unethical “tone at the top” set by Overstock.com’s unprincipled management team. Every single initial financial report for every reporting period issued by Overstock.com has failed to comply with GAAP and other SEC disclosure rules since the company’s inception. Overstock.com has restated its financial reports two times in the last three years and now is trying to avoid a third restatement of financial reports resulting from its improper use of “cookie jar” reserves to inflate its financial performance from Q4 2008 to Q3 2009.

In case you’re not convinced of management’s shadiness, Sam also pointed out that they intended to wait for the current SEC inquiry to be resolved prior to choosing a new auditor:

Patrick Byrne and Jonathan Johnson went back on their promise that they would not shop for an audit opinion. Both Byrne and Johnson previously told investors that Overstock.com would wait until after the SEC Division of Corporation Finance completed its review of the company’s financial disclosures.

We looked at the transcript of the conference call and here’s what we found (a link to the entire transcript is below):

Willis Taylor – Gagnon Securities – Analyst

Since you’ve dismissed your auditor for a very specific accounting choice, when you go to select a new auditor, how do you prevent yourself from being accused of opinion shopping?

Jonathan Johnson – Overstock.com – President
That’s a great question, Louis, and that’s part of the reason that we’ve decided not to select a new auditor until this — until we resolve this issue with the SEC. We do not want to be accused of opinion shopping. We’d like the SEC to help us figure out — we’d like them to say we’ve done it the right way or we’ve done it the wrong way. Once they say one of those two, we don’t need to opinion shop.

Patrick Byrne – Overstock.com – Chairman and CEO
But, so, I would even say to the point that when people have contacted us, we have discouraged any communication on the grounds that we got — for just that reason — well, I have the — no matter who we talk to now, then whoever we ultimately pick, people are going to say, well, you did this because you opinion shop.
So we’re really not having discussions with anybody. It’s nice to get phone calls, but we’re not talking to anybody until we get through this just to prevent — just as a prophylactic measure.

From the sounds of it, Overstock was beating off firms with a stick, so the pressure must have gotten to company’s audit committee to pick a new firm prior to the SEC wrapping up its little inquiry. So can we assume that since the SEC hasn’t told them yay or nay on their accounting, they ARE opinion shopping?

And so the winner (read: next to be dismissed) is KPMG, who not only has to throw together an audit for 2009, they have to re-issue 10-Qs for the last three quarters. Who in SLC is giving up sleep for the next four months?

Here is the Overstock press release (we emphasized some good parts) which is not shy about slamming Grant Thornton or that the SEC isn’t finished with its inquiry:

Overstock.com, Inc. (Nasdaq: OSTK) today announced that its Audit Committee engaged KPMG as the company’s independent registered public accounting firm of record for the fiscal year ending December 31, 2009. KPMG will conduct an integrated audit of the company’s 2009 financial statements, including review of the company’s quarterly information for the periods ending March 31, 2009, June 30, 2009 and September 30, 2009.

“It is nice to be back with a Big Four accounting firm,” said Jonathan Johnson, President of Overstock.com. “We are pleased to have the resources and professionalism that KPMG brings as our auditors. We will work closely with them to timely file our 2009 Form 10-K. In the meantime, we remain in discussions with the SEC to answer the staff’s questions on the accounting matters that lead to our filing an unreviewed Form 10-Q for Q3.”

Overstock.com’s Audit Committee dismissed Grant Thornton, its previous auditors, in November when Grant Thornton advised the company that they had revised their position on how the company should have recorded a $785,000 asset in 2008, and, that as a result of this revised accounting position, Grant Thornton would be unable to complete their review of the company’s Q3 2009 financial statements unless the company amended its previous 2009 quarterly filings and restated our 2008 financial results.

We wanted to get KPMG’s thoughts on this but our emails have gone unreturned at this time. If you’re in the know, definitely get in touch with us about anything related to the latest twist to this story.

OSTK_Transcript.pdf

The Day After: KPMG and E&Y Holiday Party Report

Thumbnail image for HolidayParty.jpgWe were reminded that not only was E&Y FSO raging at a tourist trap last night, KPMG’s Financial Services practice was also tying one on at Jim Brady’s in the FiDi. This particular fiesta is the first major get-down we’ve heard of KPMG hosting so it’s good to know that there’s a little bit holiday cheer at every firm.
The Jim Brady’s party has been a popular event in the past and it’s a partner-free party so it’s a perfect opportunity for Klynveldians to blow off some steam, pants optional.
One source told us that it was well attended again this year despite being beer and wine only. We’re confident that was supplemented by flasks and other treats as another told us that the party was a “blast”. Safe to say that there was plenty of ass-grabbing as well as being an all-around bitch-about-KPMG fest.
Considering we haven’t heard a peep about E&Y’s get-down at TOTG, we can only assume that it was also epic.
Hopefully your cocktail flues have subsided to the point that you can tell us about the great night. If you remember anything, share the highlights or get in touch.

KPMG Global Revenue Drops 11.4%

Thumbnail image for Thumbnail image for Thumbnail image for PomeranianSP1324.jpgThe wait is over Klynveldians. Your firm’s revenue results are out and — not to put fine a point on it — they’re disappointing.

The press release has the typical spin that we’ve come to expect from the Big 4 bigiwigs as Tim Flynn focuses on the, ‘high growth markets’ and the opportunities that arise out of ‘a markedly changed regulatory environment’ (code for: “Democrats are in power”).

These “opportunities” are noted but the numbers speak for themselves. As Big Four Blog notes, “A drop in revenue was expected, the surprise was the magnitude of the drop, which was higher than other Big4 firms.”


From the press release:

KPMG, the global network of professional service firms providing Audit, Tax and Advisory services, today announced member firm combined revenues totaling US$20.11 billion for the fiscal year ending September 30, 2009, versus US$22.69 billion for the prior fiscal year, representing an 11.4 percent decline in U.S. dollars.

“While overall revenue results for the 2009 fiscal year reflected the global economic downturn, we were pleased that our continued investments in high growth markets resulted in continued growth in those country member firms,” said Timothy P. Flynn, Chairman of KPMG International.

The drop in revenues breaks down like this:

• Audit – $9.95 billion in FY09 versus $10.69 billion in FY08, a 6.9% decline in U.S. dollars.

• Advisory – Revenues of $6.07 billion in FY09, versus $7.27 billion in FY08, a 16.6% decline in U.S. dollars.

• Tax – $4.09 billion in FY09 compared with $4.73 billion in FY08, a 13.4% decline in U.S. dollars.

The numbers certainly speak to the tough year that KPMG professionals have witnessed through many rounds of layoffs and several shake-ups that appear to be part of major restructuring in the U.S.
So now that the 2009 earnings season has come to a close, all the firms can focus on making 2010 less crappy. That should be breeze. We shall see. If you’ve got thoughts on the Radio Station’s year, or want to talk about how psyched you are for 2010, discuss in the comments.

KPMG reports 2009 revenues of US$20.1 billion [Press Release]

See also: KPMG 2009 Revenues of $20 B Drop 11%, Most Among Big Four Firms [The Big Four Blog]

Rumor Mill: Tim Flynn Paying a Visit to Montvale Today?

TimMFFlynn.jpgThat’s what we’re hearing! A source has informed us that TF is in the Garden State today “announcing a significant amount of outsourcing within the IT practice of the firm.”
Our source also indicated that TF — currently running second in the Accountant of the Decade vote — is:

…making general statements about the firm as a whole in regards to outsourcing. We were told that if we were getting outsourced there would be “advanced warning” or that they would try to move people around without letting them go, etc.

“Advanced warning” like a flare gun? Church bells? A lighthouse? The people need something more specific, TF.
It sounds both internal IT and advisory IT professionals are getting the pleasure of the pep talk so if you were there (or going this afternoon, rumor is there’s two meetings), send us your thoughts and discuss.

KPMG Prolongs the Agony by Releasing Just UK Revenue Results

Thumbnail image for 200px-KPMG.svg.pngThose of you that are dancing on one leg for KPMG’s global revenue results are going to have suffer with the anxiety for awhile longer. We know, we know. We’d love for the whole reporting season to limp into history but we have yet to hear Tim Flynn put his positive spin on this year’s revenue results.
Oh sure, we’re getting teased today by the UK firm and its European parent but this just prolongs the agony:

The UK firm saw revenues fall by 1.6%, to £1.63bn for the 30 September year end.
Profits fell 1.3% to £382m from £387m.
KPMG Europe’s revenues were €3.5bn, a 0.4% decrease on the previous year.
Its joint chairmen said the results were a “creditable performance”.
“We might have hoped for better economic conditions in our second year as a merged firm but rather than put our expansion plans on hold we have continued to pursue a whole range of strategic initiatives that will shape our performance over future years,” said John Griffith-Jones and Rolf Nonnenmacher.

Despite the disappointment Even with this creditable performance, Europe wasn’t without its problems, seeing the tax revenues drop 12%. No worries though, they promise to pull their weight 2010:

After suffering a 12% fall in tax revenues, Griffith-Jones said the service line was set to hold firm with the rest of the business next year.
“We resized the practice, and are fine where we are, [it’s performance] should be much more in line with the rest of the firm – it’s taken the pain.”

That’s the spirit! Lemons into lemonade. Now make with the band-aid ripoff method on these global results. Nobody’s expecting the world. Dump the press release, get a pep talk from TF and get back out there Kylnveldians. Here’s to 2010!
KPMG UK chief lines up modest 2010 growth [Accountancy Age]

KPMG Has to Be Pretty Happy with the Golfer They Chose to Sponsor

Phil-Mickelson_Tim Flynn.jpgAs we mentioned yesterday, Accenture is on the hunt for a new poster boy. While we speculated that poaching Phil from the House of Klynveld as a possibility for Accenture it’s more likely that the spotlight will be falling on Mickelson and his KPMG cap (black or white, depending on the mood).
Although Phil won’t be dancing on Tiger’s grave, Tim Flynn may have been quietly making the rounds at 345 Park high fiving anyone and everyone at work on the Monday after Tiger’s crash.
If you’ve got any thoughts on how TF celebrated (sweater vests for everyone!) discuss in the comments.

Operation Bear Hugs Debrief

Thumbnail image for Tim_Bear_King_jpeg.jpgSeriously Kylnveldians, we were hoping for a stellar report on last Friday’s nationwide Bear Hugs but so far we’ve heard nothing (other than some people were bolting early to get their drink on).
We’ll take your radio silence as admission that you had an awesome time and that not having an open bar rager wasn’t so bad after all. Besides, it’s for the kids.
There’s video of the New York Office’s get-together over CBS2 where we learn that there was actual sewing involved and a dancing bear to keep everyone entertained.
Share your thoughts on the experience including if your bear’s head ended up on its ass, if you couldn’t resist spiking the punch, or if you were MIA and what your punishment is.

Rumor Mill: KPMG Debunking ‘Six Year Manager’ Rumors?

corp_ladder.jpgWhile many Klynveldians are getting amped to cobble together some bears for the kids this morning we’ll pass along a little rumor about a rumor.

The rumor that the KPMG bigwigs have been considering a six year timeline to make manager in the audit practice has been kicked around for at least a couple years. Naturally, there were two schools of thought:

• Managers thought it was good idea

• SAs thought it was a terrible idea

According to a tip we received, apparently there is an email floating around that says the rumors about a “six year program are not true and that the firm will continue with existing promotion timing.”

A friend of GC told us that while it’s entirely possible that such an email exists, it’s definitely not coming down from 345 Park and could be some local office trying to calm down those SAs that are considered flight risks.

Regardless of the rumored debunking, the path to partner is certainly becoming longer as we reported earlier this week, and early promotions will still happen based on need or political maneuvering.

If you’ve been notified that your promotion timing is still on track, by email or otherwise, pass the info along or discuss in the comments.

Are You Ready to Build Some Bears KPMG?

Tim_Bear_King_jpeg.jpg“Tim, you really shouldn’t have. Seriously. I’m a King, for crying out loud.”

In case you’ve forgotten, KPMG’s bear-building extravaganza is tomorrow and word around the campfire is that everyone is psyched.

At least one office is dedicating the better part of the morning to the “Town Hall” portion of festivities which sounds like it could be a real hoot. We’re guessing there might be a little session regarding stationery controls, given the whole Canopy sitch.

Since all the offices are having their get-downs tomorrow keep us updated throughout the day on anything interesting that comes up.

(UPDATE) KPMG’s Letterheadgate May Require the Firm to Revisit Stationery Controls or Get Rid of the Blue Squares

kpmg_pink.gifAll right Klynveldians, we don’t know which one of you was a little generous with the letterhead but you’ve really done it.
Jeremy Blackburn, COO and President of Canopy Financial was able to raise $75 million for Canopy Financial based on bogus audit reports he provided to investors and pocketed more than $2 million for himself, according to the SEC’s complaint against Blackburn and the Company.


We’ll give the man credew the script:

Blackburn sent [Canopy CEO, Vikram] Kashyap an email dated June 30, 2009, attaching the KPMG Audit Report and the audited Canopy financial statements, with an email subject heading of “Audit Finally Complete,” and email text stating “I never wanna [sic] go through this again!!”

Kashyap apparently wasn’t in on the little secret that KPMG was not engaged to audit squat for Canopy. Nice work staying on top of everything, Vik. Meanwhile, Canopy’s investment bank, Financial Technology Partners, didn’t need an email telling them the audit was hell. They just ran to VCs with the notion that everything was on the up and up.
The bank is all bent out of shape because they’re taking heat and claim ‘We clearly had no clue about any such wrongdoing.’ Who wants to bother with the auditors? As Michael Arrington of Tech Crunch notes, “A 10 second phone call could have cleared this up before investors plowed $85 million into the company.”
The whole thing finally went south when Canopy’s new general counsel contacted an acquaintance at KPMG to help him find a new CFO. Canopy’s general counsel then sent over the “audit report.”

KPMG quickly responded to Canopy and advised Canopy in a “Cease-and-Desist Demand” letter dated November 3, 2009, that Canopy used KPMG’s name without KPMG’s authorization and consent. Further, KPMG told Canopy that it: (1) had never been retained nor agreed to audit any of Canopy’s financial statements; and (2) did not issue the audit opinion dated June 29, 2009. KPMG demanded, among other things, that Canopy “immediately CEASE AND DESIST from using the subject report and/or the unauthorized use of the KPMG name….”

It’s seems obvious that KPMG did nothing wrong here but this is still a big bowl of awkward. The firm’s name is all over the complaint and who knows how many other companies are running around with the firm’s letterhead throwing their “audited” financials around.
As we’ve indicated, this may call for a completely new look for KPMG. That means no more blue squares. We realize that’s a horrifying thought but the whole firm may be compromised. If you’ve got suggestions for the look (other than pink) or any thoughts on this snafu, discuss in the comments.
UPDATE: A tiny clarification/correction here: The original post over at Tech Crunch states, “Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead.” One could get the impression from our post here that genuine KPMG letterhead was used. That does not seem to be the case. The SEC’s complaint states that the audit report was “falsified” or “forged” without mentioning the authenticity of letterhead.
Nevertheless, we still stand by our conclusion that the Firm has no choice to either revisit stationery controls (since it’s obvious you can’t just get the shit anywhere) or change the entire logo as a precautionary measure. Similarly, we will continue to address this particular scandal as “Letterheadgate” to best follow the tradition of any scandal happening in the post-Nixon era to be suffixed with “gate”. We’re done here.
Canopy Complaint.pdf
Canopy Financial Turns Into Sad, Comical Game Of Hot Potato [Tech Crunch]
Earlier: KPMG Will be Stingy with the Letterhead From Now On

(UPDATE) KPMG Will be Stingy with the Letterhead From Now On

Thumbnail image for 200px-KPMG.svg.pngHave you been craving a tech startup accounting scandal? Thought so. Enter Canopy Financial, Inc. who “provides technology-enabled electronic payment, account management, and investment technology platforms for health savings accounts, flexible spending accounts, and health reimbursement arrangements.”
The company was ranked #12 in the 2009 Inc. 500 List of fastest growing companies in America:

In 2008 CEO Vikram Kashyap said his company had 2007 revenues of $9 million. More recently, we’ve heard, the company was saying they’d hit $60 million in revenue and $9 million or so in EBITDA.
All of this may have been lies.
Until recently all the venture capitalists involved proudly placed Canopy Financial on their portfolio pages. Now all trace of the company have been erased from the portfolio pages of investors GGV Capital, Spectrum Equity and Foundation Capital. And their investment bank has erased them from their trophy page as well.
So what happened? Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead. And somehow the investment bank and all the investors never figured it out.

Jesus, this doesn’t even qualify as cooking the books. This is more along the lines of:

CFO: No, we cannot say $100 kajillion.
CEO: Why?
CFO: Because no one will believe it.
CEO: Why?
CFO: Do you know what a kajillion looks like?
CEO: Um, no.
CFO: It has to look like a real number. I’m saying $59,984,387.
CEO: What about…
CFO: Shut up, that’s the number.

Then all you have to do is get your hands on some KPMG letterhead and BAM your company is listed in a magazine.
We tried contacting KPMG about this but our emails have gone unreturned. We’ll let you know if we hear back from them. In the meantime, if you know anything more about this particular story, enlighten us in the comments.
UPDATE: See the clarification about the authenticity of the letterhead on our post from December 3rd.
Canopy Financial Accused Of Serious Financial Fraud, Investors Burned [Tech Crunch via FINS]

The KPMG Dress Code Now Accommodates Ugly Christmas Sweaters

Ugly Sweaters 130.jpgAt least for one day, anyway.

You’re all acutely aware that many firms are opting to forgo holiday parties this season in favor of charitable activities.

Regardless of your desire — and our sincerest hopes for you — to get cop-slugging drunk on your firm’s dime, the commitment of time to charity is admirable. KPMG is spending an entire day building bears and wrapping them with books. We’re not sure how that will work but whatever.

As an added bonus, we heard that at least one office is attempting to make things more festive:

Picture 4.png

If some of you aren’t able to get behind the celebration of hideous Clark Griswold-esque sweaters for the sake of sport, shame on you. In fact, since the charitable activities are mandatory (as we understand), we’d go so far to suggest that the donning of ugly sweaters should also be mandatory. Judging by many or your fashion proclivities, this will be as easy as opening your closet.