We received several reports over the weekend and today about regional restructuring at Ernst & Young that will go into effect on January 1.
The majority of the North Central region will combine with the Mid-Atlantic region to form the new “East-Central” region, while the Toledo and Detroit offices will join the Midwest region. One source has told GC that this move is “an effort to reduce infrastructure and we should not be distracted from our client serving duties.”
We have also confirmed that the Pacific Northwest and Pacific Southwest regions will combine into a single “West” region. Again, sources indicating this move is an attempt to reduce overhead costs, saying “Lots a current senior leadership will be moved around,” as a result of this consolidation.
Both regions have seen significant layoffs just in the past month, and reports as recently as December 9th for the North Central. Some may go so far to say that the layoffs were a precursor to these plans but that’s speculative sport on our part.
We reached out to an E&Y Spokesperson who said that the firm prefers not to comment on internal matters.
E&Y’s restructuring follows a major restructuring at KPMG that we reported on earlier this year which saw several leadership changes and rumors of the firm consolidating down to two regions in the U.S.
One of our sources indicated that more news is expected this week so if you have any further details on these changes, get in touch with us, and discuss your thoughts in the comments.
Category: Big 4
If it happens at a Big 4 accounting firm, we’re talking about it here.
The Day After: KPMG and E&Y Holiday Party Report
We 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.
An Opportunity Lost
Gang, we’re a little upset about something today. Last week we told you about something that had the potential to turn awards for accountants on its green eyeshade wearing head.
Yes, we’re talking about the doomed Deloitte ballot sent out by Holly Leam-Taylor. Today would have been the day that she had sent out the results of her sluttiest future partner, hottest old man, et al. awards, if it had not been for her inexperience with sending out superficial emails about her colleagues.
If Holly had only consulted with someone, anyone with experience on such matters, they could have explained that Deloitte is not a place for such “fun” things and that using her work email was not the best way to solicit nominations.
Alas, our request for someone to pick up where Holly left off has been roundly ignored and here we are on a Friday with nothing to share about Deloitte’s hottest men in London.
So far we’ve been unable to track down Holly since her Deloitte email has been obliterated. Holly, if you’re out there, get in touch. We’ll get your side of the story out there. We know you’re fed up but this will be fun. We promise. Anyone else that can put us in touch with Holly, please help. We’re still getting over our disappointment.
KPMG Global Revenue Drops 11.4%
The 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]
Ernst & Young Pays $8.5 Million to Settle Charges with SEC Over Bally Fraud
Six current and former partners at Ernst & Young were charged, along with the firm, by the SEC late yesterday in relation to the audits the firm performed of Bally Total Fitness’ financial statements from 2001 to 2003.
Bally settled accounting fraud charges with the SEC in 2008 that were related to its financial statements from 1997 to 2003.
Because everyone and their dog was freaking out over Enron in screws to their clients to follow GAAP, E&Y had identified Bally as “one of E&Y’s riskiest 18 accounts and as the riskiest account in the Lake Michigan Area.”
Floyd Norris:
The firm forced Bally to stop recording revenue in an improper manner that allowed it to claim earnings earlier than was allowed by accounting rules.
But in doing that, the firm allowed Bally to not admit to having violated the rules in the past, an action that would have forced it to restate its accounts and admit that losses in previous years had been much larger.
Mr. Norris also reported that a source of his at the SEC has stated that “he knew of no previous enforcement cases in which a partner of a major firm was cited for his actions as head of a national office.”
The partner in this case is Randy G. Fletchall, the partner in charge of E&Y’s National Office. He along with Mark V. Sever, E&Y’s National Director of Area Professional Practice, and Kenneth W. Peterson, the Professional Practice Director for the Lake Michigan Area office are the current E&Y partners who settled the charges with the SEC.
The former partners include: Thomas D. Vogelsinger, the Area Managing Partner for E&Y’s Lake Michigan Area through October 2003, William J. Carpenter, the E&Y engagement partner for the 2003 audit, and John M. Kiss, the E&Y engagement partner for the 2001 and 2002 audits.
While the news of a current partner of such lofty heights is notable, an extra twist that isn’t being reported in the MSM comes from GC contributor, Francine McKenna, who tells us that Mr. Fletchall served as the former AICPA Chairman from 2007-2008 and Mr. Sever, a former chairman of the Accounting Standards Executive Committee:
What none of the stories that just hit tell you, though, is that at least two of the EY partners charged, Fletchall and Sever, held leadership positions with the AICPA in the past.
…
Did Mr. Fletchall get off with a slap on the wrist given his AICPA leadership position, AICPA PAC contributions and significant campaign contributions to Senator Christopher Dodd? Mr. Fletchall is used to telling the SEC what it should do. Quite used to it.
These are interesting questions that the SEC probably doesn’t want to address. The connection, in appearance, is shady and we can only speculate as to what happened during the negotiations of the settlement.
The Commission, remaining stoic, gave a standard issue boilerplate statement, saying:
“It is deeply disconcerting that partners, even at the highest levels of E&Y, failed to fulfill their basic obligations to the investing public by not conducting proper audits. This case is a sharp reminder to outside auditors that they must carry out their duties with due diligence. The $8.5 million settlement, one of the highest ever paid by an accounting firm, reflects the seriousness of their misconduct,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
So it appears E&Y is getting sent to their room here, despite the $8.5 million fine being “one of the highest ever paid by an accounting firm.”
The firm also agreed “to undertake measures to correct policies and practices relating to its violations, and agreed to cease and desist from violations of the securities laws.”
Were the AICPA connections enough to keep them out of really hot water? At the very least, it didn’t hurt anything. If you have any information regarding this story, get in touch with us, and we will update you with any developments.
SEC Charges Ernst & Young and Six Partners for Roles in Accounting Violations at Bally Total Fitness [SEC Press Release]
EY Settles SEC Charges Re: Bally’s Fraud-Lives To Audit Another Day [Re: The Auditors]
Ernst to Pay the S.E.C. $8.5 Million [Floyd Norris/NYT]
Deloitte Survey: The Next Generation of Employees Will Not Stand for the Inability to Update Their Status
In Deloitte’s Survey Du Jour we learn that your future underlings are going to want — nay — DEMAND the ability to move up in Farmville while they’re at work (at least one person understands your obsession).
Okay, demand is a stretch but dammit the kids these days are an ethically conscious bunch so you can trust them to get their work done while checking all their hot friend of friends.
Nearly nine-in-10 (88 percent) teens surveyed use social networks every day, with 70 percent saying they participate in social networking an hour or more daily. More than half (58 percent) said they would consider their ability to access social networks at work when considering a job offer from a potential employer. This comes as many organizations have begun implementing policies that limit access to social networks during the workday due to concerns about unethical usages, such as time theft, spreading rumors about co-workers or managers and leaking proprietary information, among other reasons.
Most of the teens surveyed feel prepared to make ethical decisions at work (82 percent) and a significant majority of teens say they do not behave unethically while using social networks (83 percent).
There’s really no cause for concern when you’ve got newbies out there asking their friends to vote for their sluttiest co-worker using a work email address. We do realize that some people make better decisions than others.
Overall, we don’t see what the BFD is. Commercials on the tube portray “responsible” adults on Facebook so to allude that the next wave of corporate soldiers would be the only ones that wouldn’t take a job with limited access to social networks seems weak. There’s plenty of people working already that have that point of view. Plus, pretty soon everyone on FB, Twitter, et al. will have phones that can run those apps. Just let people do what they want and they’ll be much happier.
Now excuse us, we’ve got strawberries to harvest.
No Facebook at Work? No Thank You! Teens Expect Access to Social Networks On-The-Job [Junior Achievement/Deloitte Poll]
Rumor Mill: Tim Flynn Paying a Visit to Montvale Today?
That’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.
Don’t Forget about the Ernst & Young Holiday Rager Tonight!
In case you’ve been so distracted by the Tiger Woods story that everything else has been pushed to the back corners of your mind, we’ll remind you that New York FSO Holiday Party is tonight from 6 to 10 pm over at Tavern on the Green.
For the less fortunate of you, this may be your last chance to get some shameless ass-grabbing done. So if you’ve got nothing better to do, we suggest you check it out.
On the booze front, we’re keeping our fingers crossed that you’ll have open bar, but judging by the actions of other E&Y offices, you might want to stop by the ATM just in case.
Our invite appears to have gotten lost so if someone wouldn’t mind sending ours over that would be great. We’ll accept especially festive pics in lieu of an invite (read: JIM. TURLEY. DANCING.) Have a great time, and don’t forget who you’re representing (?).
Deloitte Changes Its Mind on Kohlberg Capital’s Ability to Value Its Investments
A friend of GC pointed us to this 8-K filed by Kohlberg Capital Corporation yesterday. Unless we’re misinterpreting this, there are some seriously awkward conversations going on between Deloitte and Kohlberg right now (our empahsis):
Deloitte issued an unqualified opinion on the Company’s December 31, 2008 financial statements, which was included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009. The Company is not aware of any allegation or belief by Deloitte that the information provided by the Company to Deloitte at the time of the preparation of the Financial Statements regarding the Company’s valuation methodology and procedures was incomplete or inaccurate or omitted any information requested by Deloitte at such time. On December 10, 2009, the Company and its management were advised by Deloitte that (i) the audit report issued by Deloitte accompanying the Company’s financial statements for the fiscal year ended December 31, 2008 in the Company’s Annual Report on Form 10-K for such fiscal year and (ii) Deloitte’s completed interim reviews of the Company’s financial statements for the interim periods ended March 31, 2009 and June 30, 2009 in the Company’s Quarterly Reports on Form 10−Q for those respective periods should no longer be relied upon because Deloitte had changed its position with respect to the appropriateness of the methodology and procedures used by the Company under SFAS 157 to value the Company’s investments as of the end of each of those periods and, as a result, the Company has been informed that Deloitte now believes, based upon such changed position and the additional information provided to Deloitte by the Company following Deloitte’s internal inspection process, that such Financial Statements contain material misstatements with respect to the value of the Company’s investments included therein. Accordingly, the Financial Statements should not be relied upon until the foregoing matters are resolved.
This filing followed up Kohlberg’s filing of an 8-K and form 12b-25 on November 9th to let everyone know, um, yeah, that Q is going to be late because Team D wants to take a look at this 157 stuff again. That was probably annoying enough.
But nowwwww it looks like the audit team spent the last month realizing that the pooch had been screwed on the last two 10-Qs annnnd last year’s 10-K. So yeah, don’t pay attention to the those filings. The one bright side to this is that Kohlberg had the sense to not file an unreviewed Q.
If you’ve got details on this, definitely get in touch with us, we’d love to know how the partner broke the news and how Kohlberg took it. The 8-K certainly doesn’t do that conversation justice.
Deloitte’s Latest Survey Reminds Everyone That Americans Like Vedging Out
Deloitte threw their “State of The Media Democracy” survey together for the fourth year in a row, and man are we glad they did. This latest opus informs us that TV is 34% of Americans’ favorite form of media and that it ranks in the top three for 70% of Americans. Viewing hours increased to almost 18 hours a week, up two hours from the same study last year.
The same survey also states that 60% of the U.S. Households have a gaming console including 70% of GenX households. So for many of you, after a long day of opining and complying, you like to go home and pwn some noobs.
Forget — for a minute — about what this reveals about Americans in general. What’s really important is that Deloitte is going out of their way to perform a survey annually that will remind all of us how lazy we are.
This is almost as helpful as as the reports based on World of Warcraft analysis. Keep up the good work, D.
Deloitte “State of The Media Democracy” Survey: Recession Intensifies America’s Love for TV [Deloitte.com]
Study: Interest in TV viewing on the rise [The Hollywood Reporter]
KPMG Prolongs the Agony by Releasing Just UK Revenue Results
Those 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
As 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.