Category: Big 4

If it happens at a Big 4 accounting firm, we’re talking about it here.

Signed, Your Friendly Human Resources Professional

HR.jpgEditor’s note: Welcome to the debut post from Daniel Braddock, your friendly Human Resources Professional. He could very well be considered a hypothetical love child of Suze Orman and Toby Flenderson. Following his varsity jacket wearing college days, he entered the consumer markets as an auditor for a Big 4 firm in New York City. He spent three brisk years as an auditor before taking the reins of stirring the HR kool-aid. He currently resides in Manhattan. Daily routines include coffee breakfasts and scotch dinners. You can follow him on Twitter @DWBraddock.
Greetings,
Please let me take a moment to introduce myself.
My name is Daniel W. Braddock, and I was a resourceful human. I was not chargeable. I was not overworked. I stroll in at 9:00am, take a long lunch, and skip out before 6:00pm. You consider me a waste; overhead expense; non-vital to the process. You have me to thank for Summer Friday’s, the crackdown on mentor-ship lunches, and for that blasted Bear Hunt. My degree can be in liberal arts, accounting, or psychology. I was from the world of H.R., or Human Resources Rubbish, as you refer to me.
You generally loathe my kind.


My name is Daniel W. Braddock, and I was on your side once. Stressed, over-utilized and under-charged. I know work/life balance initiatives are as good as the fluffy magazine rankings they earn. I saw first-hand how leadership continously drops the ball on estimates, budgets, and correspondences. I was invited to lush recruiting events, asked to slap on the charm and pretend the ship wasn’t sinking. I’ve been in the trenches, didn’t like what I saw, and left.
My name is Daniel W. Braddock, and I am adaptive. I spent years in the audit practice of a Big Four firm before transitioning my career to the the H.R. side of the house. I have traveled through the looking glass and back. Contributing to GC will shed new light on many topics, including:
• Outsourcing, both foreign and domestic
• Hiring forecasts
• The world of recruiting
• Hiring cycles and leadership’s faults
• Work/life balance initiatives and the real “initiative” behind them
• Firm rankings in the media
• The next step – life after the Big 4
I’m looking forward to our future discussions, beginning with a new topic on Thursday. As always, please send suggestions and ideas for topics to tips@goingconcern.com.
Regards,
Daniel W. Braddock
H.R.

The GC Metaphor Challenge

Yesterday we shared with you at least one person’s opinion about how quitting the Big 4 is a little like leaving Ike Turner. If that name doesn’t mean anything to you, insert Jon Gosselin. Get it now?
As accurate as that may be (and certainly not a laughing matter), we can’t help but think there are other metaphors that you’ve heard that you might want to share here.
Of course there’s the proverbial pimp/whore relationship but that’s played. Get the team together and come up with something good. We’ve got E&Y tchotchkes to give away as prizes (don’t let that dissuade you E&Y peeps, we’ll come up with something).
We’ll give you a couple of options to work with:
1. Working in the Big 4 is like…
2. Leaving the Big 4 is like…
Annnd go.

Quote of the Day

From a soon to be ex-Ernst & Young SA:

Being employed by a big 4 is like being in an abusive relationship. You know its bad for you but its still kind of addictive.

Right on the money? Dead wrong? Addictive like salt & vinegar potato chips or addictive like the stuff that’s in Rush Limbaugh’s medicine cabinet? Discuss.

Big 4 Performance Analysis Will Probably Come as a Huge Shock to CNN

You may remember a little rant we (and others) went on not so long ago about CNN buying what the Big 4 were selling re: growing business in shrinking economy.
Well! The gang over The Big Four Blog have put out a performance analysis (PDF can for download: big4_media_kit.pdf) for the firms’ 2009 revenue and their conclusions tell a different story.
From the Execkquote>2009 was a difficult year overall for the Big Four accounting firms: Deloitte, Ernst & Young (E&Y), KPMG and PricewaterhouseCoopers (PwC), as their financial performance was affected by tough external conditions, slow global economic growth, cost-conscious clients and sluggish merger and acquisition activity.


After an extraordinary period of continuous revenue growth from the early 2000s to 2008, combined revenue for the four firms in fiscal 2009 did fall by 7% from fiscal 2008 in US dollar terms. Revenue decreases in US dollar percentage terms ranged from negative 5% for Deloitte to negative 7% each for Ernst & Young and PricewaterhouseCoopers to negative 11% for KPMG.

One of the more interesting tidbits was presented in the chart below:
Picture 1.png
After a growth in employment of over 10% in 2008, the rate dropped to 2% for 2009 and judging by the firms’ expectation to offer less internships this year we’d expect that trend to continue.
It’s worth noting that even in the rebuilding year, the firms’ combined revenue was $94 billion so no one is starving but, as BFB pointed out, the firms near decade long run of growth has now come to a screeching halt.
With all the new information, CNN might consider a follow-up story. We’d be happy to take a look at it. Or they may just leave it there:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
CNN Leaves It There
www.thedailyshow.com
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How Does Seeing 5 Times Square on New Year’s Eve Make You Feel?

EYa.jpgWe’ve noticed a lot of chatter in the Twitterverse from soldiers in Uncle Ernie’s army regarding the E&Y sign in Times Square. As you might imagine, the reaction is mixed.
Wanting some reader input we asked around to some of our E&Y sources for their thoughts on seeing the sign on the tube while ringing in the New Year or their reaction if they saw it. So far, we’ve only heard back from one source (are people working too hard already?):

Hmmmm EY on a TV…..I’d flip the eff out!!!!!! No raises this year. I’d probably drag the TV out by its power cord. Then I would taunt it, kick it, give it cigarette burn marks and finally bury the tv alive by strapping it to a gas generator and dumping it in to a smelly landfill. I would then go home, feel bad for the tv for about 5 seconds and eat some apple pie.

For the non-E&Yers the sign may not provoke such shockingly violent images. However, if you did have any thoughts, any thoughts at all, when you saw the sign on NYE, feel free to share them here. We don’t want you to scare your therapist.

Let’s Go Over this Independence Thing One More Time

To be fair, Thomas Flanagan — having been a partner at Deloitte for 30 years — probably didn’t remember the day that his auditing professor covered independence. If you figure that Tom was in college in the late 1960s, it’s surprising that he remembers anything.

Also, as the vice chairman of the firm, his job was to remind people of their duty to remain independent of the firm’s audit clients. He didn’t actually have to be independent himself. What good is insider information if you’re not going to use it, amiright?

Deloitte had sued Flanagan in Delaware Chancery Court in October 2008 for breach of fiduciary duty, fraud, and breach of contract, saying the 30-year partner who had risen to vice chairman of the firm had secretly hidden trades in shares of Deloitte’s audit clients and lied about it to the firm.

“Because an auditor sells, at base, its independence and integrity, the firm relies heavily on the purported honesty and independence of its professionals,” Vice Chancellor John Noble, of the Delaware Court of Chancery, wrote in his opinion.
Deloitte said in its complaint that starting as early as 2005, Flanagan had made more than 300 trades in shares of Deloitte’s audit clients, including several clients for which he was Deloitte’s advisory partner.

Meanwhile, Flanagan specifically told the firm he was not trading in client stocks, which are restricted under the firm’s independence policies, according to the complaint.

Tom must have been a choir boy prior to getting the Vice Chair gig. How else could he have gotten to be such a bigwig if he wasn’t a poster child for integrity? Was he that good of a liar?

Never mind that for a sec. What’s really curious is why the hell a Vice Chairman needed the extra scratch. A comic book collection that would rival Nic Cage’s? Financing a business opportunity? A spendy wife/mistress/pool boy? If you’ve got any thoughts, discuss below and if this story doesn’t clear things up on independence, start crack the auditing textbooks.

Deloitte wins insider trading suit vs. ex-executive [Reuters]

Is Tim Flynn Being Vetted as the Next Secretary of the Treasury?

Welcome back, servants of the capital markets. We’ll dispense with anything substantive this morning in order to help you combat the depression. We’ll start off by presenting you with the following:
obama-kpmg.jpg
As you can see, this is the POTUS on vacation working in Hawaii with the entourage in tow. One member of said entourage just happens to be donning a KPMG cap and since not just anyone can get their hands on these coveted lids — and since the gentleman’s face is mostly obscured — we’re curious about a few things: 1) Is Tim Flynn leaving the Radio Station for a cabinet position and if so, which one? 2) Was Phil Mickelson joining the Prez for some time on the links and had a overwhelming urge to represent? 3) If this is just some Obama yes-man, did he receive the cap from a Klynveldian representative and is this a bold move to get KPMG representation in the President’s inner circle?
If you’ve got thoughts, theories, or wild-ass guesses, dispense them in the comments and again, welcome back.

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

Barry Salzberg Is Proud of All of You

salzberg-barry.jpgSomehow we missed Barry Salzberg’s latest masterpiece on leadership from last week and since you’ve all checked out, we’re sure you won’t mind.
When asked “Who was the best business leader of 2009?”, Dr. Phil — using every fiber of his being not to nominate himself — chose “Do-right employees”. It’s not about the BSDs of the world. It’s those of you that manage to not sit bare-assed on the copy machine and resist the urge to watch porn on your work computer. You’re the leaders setting the example:

Rather than single out a best business leader, I’d recognize the many unsung ethical heroes in our organizations. I’m talking about people who, even when no one is watching, consistently do the right thing. And they’ve been doing it at a time when confidence in business urgently needs to be restored.

Not only are you restoring confidence (?) in business, you’re going to lead us the charge into this recovery:

As we prepare our organizations for the upturn, we also need to prepare our people for the uptick in wrong-doing that can accompany better times.

First of all, what is this “upturn” you speak of? Also, Costanza-stache: “uptick in wrong-doing accompany better times”? Just what the hell is all this accounting fraud talk? Or how about executives’ bad attitudes about its employees? Or everything else?
Apparently you need to get even more vigilant people! This ship is turning around and wrong-doing is really going to take off. We need you more than ever.
Do-right employees [Washington Post]

Rumor Mill: More Ernst & Young Restructuring Details

Thumbnail image for ey8ball.jpgWe’ve got a follow up to our post yesterday about E&Y’s restructuring plans for the North Central and Pacific regions.
A source has informed us that the Financial Services Office (“FSO”) began nationalizing non-audit banking and asset management clients earlier this year. Insurance clients are also going to be under FSO, which will centralize all non-audit financial services clients. Our source has further indicated that the next step is to nationalize the audit clients. The ulitmate goal is to slim the firm down to five total regions (West, Central, Southeast, Northeast, and FSO).
We asked a couple of sources about this particular rumor to get some opinions:

I do hope this is not true, as [FSO] can’t audit their way out of a paper bag. I’m not sure why they would make an interim step as they’re making now if there’s an ultimate goal of five sub-areas

Another view:

Running FSO out of NYC seems like a good call from an overhead…cost standpoint but that’s about it. I have heard horror stories about the kind of hours FSO staff typically pull year round. I don’t see this making the “people in the trenches” any happier. Having all the work routed to one place makes it easier…to make sure that work is getting done…Of course I think this is just going to turn FSO into more of a meat grinder than it already is since they are going to do everything they can to get as much work in the pipeline as possible to keep that group busy.

As we mentioned yesterday, E&Y would not comment on internal firm matters.
If you’re in the FSO practice and can attest or refute any of the above details (horror stories, meat grinders, auditing out of paper bags) or even if you’re not and have an opinion share your thoughts below.

In Better Late Than Never News…

Thumbnail image for Thumbnail image for two thumbs up.jpegHey gang, we’ll just take a moment of your time to point out the bang-up job that’s being done at the The Business Journal of the greater Triad Area. They’re not in the class of the CNNs of the world but we figure some recognition is appropriate.
They ran a story dated Friday the 18th entitled, “Ernst & Young merging sites, making Triad virtual office” which is kinda, sorta similar to a post we did on December 10th.
Maybe we’re hung up on little stuff like choice of words and timing but we’ll be damned if we see “first reported by Going Concern” anywhere.

…roughly 60 client-serving professionals based in the Greensboro office at 202 Centreport Drive will remain with the firm, with most staying in the Triad to work remotely. They will report to and receive support services from the Raleigh office…
The statement did not specify the impact of the move on Triad support and administrative staff, including whether there are any transfers or layoffs occurring.

If the TBJ is curious, we know the impact on the support staff. You can email us here if you’re still wondering.
We also don’t see any mention of the Manchester closing either but that’s in a whole other state, so it’s probably not relevant.