Category: PwC

PwC Had Enough with Old Republic’s Sketchy Accounting

Accounting firms take a lot of grief for bending over backwards for their clients. They’re in the client service business after all and keeping them as happy as possible is priority numero uno (despite what you might hear). Considering this factoid, when an accounting firm decides to cut a client loose for a “disagreement” over an accounting practice, we feel that’s a pretty good reason for any future accounting firm to think long and hard before taking on said client (case in point: KPMG taking the Overstock.com audit).


PricewaterhouseCoopers notified Old Republic International Corp. on March 19th that they would be “declining to stand for re-election as Old Republic’s independent registered public accounting firm for 2010.” That’s nice SEC filing language for “We’re so grossed out by you that we refuse to audit you any more.”

The two firms disagreed about the accounting treatment of “certain mortgage guaranty reinsurance commutation transactions with captive reinsurers owned by lending institutions.” That description alone makes us nauseous. The gist from Old Republic’s 8-K filing:

Old Republic had concluded that, in accordance with traditional reinsurance accounting practices, funds received ($82.5 million) in excess of amounts owed to it by the captive reinsurers should be deferred and recognized in the income statements of the future periods during which the related claim costs were expected to occur. PwC believed that generally accepted accounting principles (“GAAP”) required that the $82.5 million be recognized immediately as income from a contract termination.

So you have “traditional accounting practices” versus almighty GAAP. The tradish accounting wasn’t good enough for PwC, so they brought the probelme to the attention of the audit committee. The AC ultimately decided…wait…that management was correct. Shocked? Us too. The disagreement was brought to light back in November and in a press release when the company said that the transactions in question “which resulted in little consequential effect on the pretax loss.”

Apparently PwC wouldn’t let it go and the Company called in the SEC to get their $0.02 on the matter. Lo and behold, the Commission sided with PwC. After a lot profanity-laced belly aching (that’s what we imagine, anyway) and sleepless nights for both OR’s accounting department and the PwC audit team (that’s not debatable), Old Republic filed the delayed 10-Q last month with restated financial statements.

After what was surely 5 or so months of pure hell, PwC figured that this was an awkward enough situation that a break up was warranted. This was probably the perfect opportunity for PwC to get out of this engagement. They figured Old Republic wasn’t going to change their less-than GAAP-y ways, the audit committee is obviously no help, and God knows you don’t want to get the SEC involved every single time there’s a disagreement. If you were to ask us, its seems like a pretty logical reaction.

Now the only question is, which audit firm picks up Old Republic? PwC will certainly have some interesting things to share with the firm that decides they’re up for this particular headache.

PricewaterhouseCoopers drops Old Republic [Chicago Breaking News/CT]
8-K [SEC.gov]

Compensation Watch ’10: PwC Moving Up Adjustment Date?

There’s been some whispering about PwC moving up its compensation and adjustment time frame from September to July and that’s got people curious.


At first glance this makes sense because the firm has a June 30 fiscal year-end. PLUS! Since Bob Moritz has already made it abundantly clear that there will be raises for 2010 we figure everyone would be excited to hear that the bumps would be coming a little earlier this year.

However, since everyone likes to jump to conclusions over the slightest little change, we’ll indulge. There have already been whispers of layoffs at PwC here and there but nothing that we’ve been able to confirm so people are probably antsy. And if the adjustment date is moved up we’re sure people are worried that means layoffs will be happening sooner rather than later. We can’t read anyone’s mind but we’re thinking this should be in the ballpark…

But if you’re anxiety is well founded, tell us why or get in touch.

UPDATE, a shade before 1 pm: One of our sources inside PwC shared their thoughts with us:

I think the overall feeling was positive…it will probably make some people happy (depending on the %) and hopefully limit the higher performers from going out into the market, however, it may also help some people look for jobs sooner (i.e. they don’t have to wait until September now, if the raises are low). Most people still have a lot of questions, including the estimate of the increase for each band of the rating system, what the bonus pool is going to look like, and although that is not being paid until September, whether we will know what the bonus amounts are in July.

Dennis Nally: PwC’s Credibility with Our Clients Is Doing Just Fine, Thankyouverymuch

Awhile back we told you about PricewaterhouseCoopers Global CEO Dennis Nally admitting that the PwC brand had been damaged because of the whole Satyam fraud.

DN has done another interview with the Indian press and he says despite this litng is on the up and up in India for PwC. The long/short of it is that Dennis & Co. are going to keep giving their clients the P. Dubs experience now and forever.

Pretty wide range of questions but we’ve presented the highlights for you.


Was the PwC Magic 8ball broken?

Q: When you look back at it do you think you could have avoided all that happened?

A: I don’t know if we could have avoided it. As we all know this was probably one of the most significant frauds that suddenly has taken place here in India but even in the global market place. So I do not know how you avoid that type of situation.

Where was the P. Dubs swagger when the shit hit the fan? Did you realize that everything was f’d and didn’t know what to do?

Q: [T]he firm didn’t seem to respond in a confident manner. The impression was that it didn’t know what it had been hit by. Do you think it could have been handled better?

A: I think with hindsight you can always do things better and that is part of learning and trying to deal with issues. But quite frankly this was a major event and of course it took us time to understand the pattern and what transpired.

In fact we are still learning and everybody is still learning. Now all the facts aren’t quite out yet but I think we are in the business of being out in the public and when something like this happens and it happens in a negative way, we are part of that. That is just a reality of being in a profession that we are involved with.

Why is this PwC’s fault?

Q: What role did the auditors have to play?

A: You are into an interesting debate and discussion because what is the role on a professional standards for the detection of a fraud. That is one of the areas that has been the focus not only on Satyam but a broader profession wide issue and we certainly welcome that debate.

I think there is an expectation out there in the public that auditors uncover every single fraud that they are involved with and that is not what professional standards call for but there is the public perception that that is what we are there to do. I define that as the expectation gap. If that is the expectation then we need to make sure that we are focused on the right kind of procedures, the right kind of standards, the right kind of reporting which is quite frankly really different than what we do today.

Will you stop all future frauds in India forever and ever and ever?

Q: Can you tell us if India will never see a Satyam again?

A: I wish I had a crystal ball but I don’t. As I said when you have a situation like Satyam or a major fraud I suspect somewhere in the world of corporate reporting, you are going to see another situation like that. Our job is to make sure we are doing everything we can possibly do consistent with the standards that are out there to ensure that we play our role in that process to avoid them.

The new India managing partner came from Singapore? You got something against Indians?

Q:But he has not come from India, you didn’t appoint him from the India firm – he was brought in from Singapore?

A: Gautam is originally from India which is great so it’s little bit of coming home programme.

Q: But it’s not a vote of confidence on the India management?

A: It is not. This is all about ensuring that we get the very best talent to focus on an important market like India and that’s exactly what we have done.

You let everyone down. Speak to them!

Q: A word to all those investors who felt disappointed with PriceWaterhouseCoopers for not alerting them to what was going on in Satyam. What is your message to them today?

A: Whenever we have situation like this, right or wrong, whatever standards are we are part of that and for that we regret what has happened. But this firm is about quality. It’s about doing the right things, it’s about being here for the investor community and we are very much focused on that.

Satyam fiasco has not dented credibility with clients: PwC [Money Control]

PricewaterhouseCoopers Shutting Down Orlando Tax Practice

Yesterday, PwC tax professionals got word that the firm is discontinuing tax operations from its Orlando office effective May 3, 2010.

Mario de Armas, the South Florida managing partner, explained that lack of business, “Orlando-based tax clients has declined, and we have been forced to import tax hours from other offices to keep our people busy,” and staffing challenges, “We have also faced a continued challenge around staff development in a primarily compliance environment,” lead to the closure of the practice.


The email states “We are committed to assisting each impacted individual with this transition,” although no details were given. The email also states that there will be no other Florida practices will be shut down, “To be clear, we have no plans to close any other practice areas in any of our Florida offices.” Emails to Mr de Armas and Jorge Gross, the Florida Tax leader were not returned. An email to PwC’s national press relations was also not returned.

This practice closure follows recent office closures by both Grant Thornton and Ernst & Young (“virtual” closure) in Greensboro, NC and E&Y closing its Manchester, NH office last fall.

If you will be affected by this closure, get in touch with us and we’ll continue to update you as we learn more.

Florida Colleagues:

We are constantly evaluating our client service delivery to ensure that our clients receive the best service possible and that our people are being offered opportunities for development and advancement. Over the past few years, revenue from Orlando-based tax clients has declined, and we have been forced to import tax hours from other offices to keep our people busy. A limited number of corporations are headquartered in Orlando, and while many of those corporations have been retained as audit clients, fewer have been tax clients. We have also faced a continued challenge around staff development in a primarily compliance environment, and more compliance work will be performed at the centralized Tax delivery center over time. As a result, the Firm has concluded that we will no longer have tax professionals located in the Orlando office effective May 3, 2010.

Knowing that we will be asked about this decision in the marketplace, it is important that we have a clear message to the market. From a strategy perspective, we believe that our distinctive footprint across the state of Florida makes us uniquely positioned to service our Orlando clients from our other offices, following the One Market concept.

This has been a difficult decision, and one that was reluctantly made after considering many factors. Our Tax professionals in Orlando have served our clients well. They have contributed in many ways to our market, and their efforts are valued and greatly appreciated. We are committed to assisting each impacted individual with this transition.

To be clear, we have no plans to close any other practice areas in any of our Florida offices. Please contact me or Jorge Gross, our Florida Tax Leader, with any questions you may have.

Thank you,

Mario

The Purpose of PricewaterhouseCoopers’ New HR Service in India Isn’t Entirely Clear

PwC has launched a new HR service in India and one can only speculate as to the inspiration behind staging the move there (I’ll give you a hint: it starts with Satyam and ends in fraud) but let’s take a look at the official spiel before we rush to judgment.


India’s Financial Express:

Global audit firm, PricewaterhouseCoopers, announced the launch of its human resources service ‘Saratoga’ in India along with India Human Capital Effectiveness survey (HCE), a top company official said.

“Saratoga is the most extensive database of HR metrics available globally. We are launching it in India and we have already got an immense response from Indian companies,” PricewaterhouseCoopers’ Partner and Global HRM network leader, Richard Phelps, told PTI here.

On the surface, Saratoga looks like little more than an inventory count of companies’ human capital, which means something when you have to keep a leash on a bunch of customer service guys with fake first names (how else would you keep track of them?).

See, PwC cares. They care that JP Morgan outsources call center jobs to India – I know this because I’m a Chase customer (leave me alone) and have had the misfortune of dialing in. Meanwhile, JPM’s off-shore hiring spree continues and someone’s got to handle all that “human capital”, why not PwC?

I don’t care that some guy in India has a job, I care that he calls himself Patrick and pretends to have a bizarre hybrid Texas/New Jersey accent. Is there going to be a check box on these PwC Saratoga metrics for guys who fake 50s-style American first names from Indian call centers?

I’m not bitter. It’s good that PwC cares about the global community and wants to reach out to facilitate cheap labor for its audit clients like JP Morgan (for the record I use BofA too and they have the decency to hire air-headed middle-state chicks named Kelly and Sarah).

Could you imagine what would happen if the Fed stepped in and barred PwC from auditing anything that’s moving here in the US? Hell, it happened in India.

Good luck with that human capital census or, uh, whatever it is, PwC. I mean that.

A Lawsuit Seeks To Find Out How Old is Too Old to Become a Partner at PwC

[caption id="attachment_3069" align="alignright" width="260" caption="That's a good one Bob but you really shouldn't tell old people jokes"][/caption]

Or any firm for that matter. There’s probably some opinions on this but allegedly at PwC it’s 54 on the low end and if you’re approaching the firm’s mandatory retirement age of 60 then you’re definitely not getting the bump.

The reason we bring it up is that the U.S. Court of Appeals for the District of Columbia Circuit has granted new life to an age discrimination lawsuit against PwC. Two advisory professionals, Harold Schuler and C. Westbrook Murphy’s lawsuit alleges that P. Dubs de-nied their admittance because they were close to the Firm’s mandatory retirement age.


The partner track at accounting firms is a long and tough road the way it is and for partners to allege age discrimination seems like insult to injury.

The DC Circuit ruled that the plaintiffs deserve some closure on whether or not the bigwigs in New York really snubbed them based on their age:

Judge Douglas Ginsburg said a 2008 D.C. Circuit ruling involving Schuler entitled the plaintiffs to a “reasonable inference” that PricewaterhouseCoopers’ decisions not to promote them were made in New York, where the firm is based.

“PwC says (the earlier case) ‘does not control’ because it addressed only PwC’s adoption and maintenance of a discriminatory policy, not the ‘discrete decision’ not to admit (Schuler) to partnership,'” Ginsburg wrote. “To which we say: Pettifoggery and piffle!”

Nice touch, Judge Ginsburg. So this means the case goes back to the district so they can get to the bottom of this.

We left messages at the other firms to find out what their mandatory retirement policies were to get some context on the age issue but so far we haven’t heard anything back. We’ll update you with those if we hear back from anyone.

It’ll be interesting to see how this shakes out since we’re pretty confident that their is no document anywhere at 300 Madison that says Schuler and Murphy were just too old to become partners. If we were to take a wild-ass guess, we’d say that the firm will point to performance reviews, etc. to rationalize the snub even if these guys were rainmakers.

PricewaterhouseCoopers age bias lawsuit revived [Reuters]

PwC’s Oscar Partners Get Teased, Possibly Need Adult Diapers

As we mentioned earlier this week, PwC loves Oscar time. It’s easily the biggest display of Big 4 shameless self-promotion and no one — not even us, (sans Francine?) — can blame them.

The Carpetbagger has a chat with two of the partners, Rick Rosas and Brad Oltmanns that touched on a number of things, like exclusivity, “there’s only been 12 partners to do this” and secrecy, “we go to a very quiet, windowless room in an undisclosed location”. but just because they’re counting ballots don’t get the idea that they aren’t working:

During the telecast, Mr. Rosas and Mr. Oltmanns stand at either side of the stage, with the 24 sealed envelopes containing the winners’ names, ready to be handed off to the celebrity presenters just before they walk to the podium. “It is work,” he said. “We’re standing literally in one spot for three hours or so, no rest room breaks or anything, because we have to be ready when the presenters get on the stage.”

Jesus, no bathroom breaks? Sounds brutal. Does PwC front them for a bag or Depends or something? What if they make a Starbucks right before the show? That could be problematic. Plus, you’ve got puny movie stars that used to be funny giving you a hard time:

“We do get teased from time to time especially by some of the comedians,” Mr. Oltmanns said. “I remember one year Jack Black said he was going to come over and rip the briefcases out of our hands and give us a good beating.” Did he? “No. I think each of us are larger than him, so he did not.”

Seriously. Don’t fuck with these guys. They have to keep their cool when Halle Berry walks by and their bladders are about to burst. Could you handle that?

PwC Basks in the Oscar Gold

Man, PwC is on a tear this week. Along with the announcement of the three-peat yesterday for the Training 125, the firm also rolled out its press release on the upcoming Academy Awards.

The firm is proudly counting the ballots for the 76th year in a row but this year there are ten best picture nominations and that’s a new wrinkle for the vote counters at P. Dubs.

Now we’re not going to insinuate anything like Slate did back in 2007 where they somehow made a superficial connection between scandals at PwC to their ability to count ballots. That’s just foolhardy and we wouldn’t entertain such a notion here.


Quite the contrary, this should be the biggest slam dunk engagement that PwC has. Sure there are some archaic mechanical issues (e.g. the U.S. Mail) but at the end of the day they’re just counting ballots. The biggest risk that PwC faces is someone trying to rip their arms off with the briefcases still attached. Besides, we’re sure there is a security device on the briefcases that will destroy the entire contents if opened by anyone other than a PwC partner.

But we digress.

Back to the boilerplate press release, PwC drops all kinds of facts on us including that it takes ten total days (between the nominating and the final ballots) and approximately 1,700 “person-hours” for the team to count the ballots by hand.

This begs the question: could the Oscars be indirectly responsible for PwC being embroiled in the wage and hour lawsuits? Is our insatiable demand for red carpets and Brangelina driven the importance of this annual event beyond health care reform, financial regulation, and U.S. GAAP/IFRS convergence and thus, created the sweatshop engagement that is the counting of the Academy Award ballots?

This prestigious engagement may have its benefits (e.g. tuxedos, the opportunity for awkward sexual advances on celebrities) but at what cost, dear reader? What cost?

(UPDATE) PwC Did Not Foresee the Sexting Phenomenon

We heard a rumor today that PwC is currently renegotiating their cell phone contract because, yes, they underestimated the amount of texting that would be done by employees on work phones. Foiled by Gen-Y again!

We realize it’s hard to believe that the numero uno Trainer would somehow not educate its people to avoid sending hundreds of sexually explicit messages to the person in the next row when they simply could have pull together some instructions on cubicle sex. This would have alleviated at least some of the problem.


Well it’s too late now, you randy fools. You’ve no doubt cost the firm millions in charges because you couldn’t compose yourselves.

On the other hand, who were the geniuses sitting around 300 Mad trying to figure out what the texting plan was right for P. Dubs? We know Bob Mortiz wasn’t in on it. Did they consider the fact that PwC employees might be a bunch of savages that would be spending every waking hour sending photos and dirty limericks to their spouses and FWBs?

We understand that firms are trying to save money these days but jesus, it’s common sense to spring for the unlimited texting plan.

UPDATE, Friday, Feb. 12th: We heard back from a source who shared this:

I think they give us something like 100 a month (not positive) which doesn’t affect me, but some people in my office laugh about how much they go over.

Let’s say it is 100 a month. Depending on your prowess, one sexting encounter could conceivably use up a whole month. Someone tell PwC Ops (or whoever is in charge of these things) to go for the unlimited plan.

PwC Achieves Dynasty Status on Training Magazine’s Top 125

Did you think that the Big 4 domination of all magazine lists was over? Jesus, were you wrong. Not only is PwC numero uno on Training Magazine’s Top 125, they’ve been in the top spot for three years running. Clearly this is solidifies the dynasty for P. Dubs.

Personally we don’t think it would be that hard to get on this particular list. You fly everyone to a relatively large city that has bars, casinos, and strip clubs near the hotel and you’ll get some positive feedback regardless of the boring topics discussed.

The magazine lists its criteria for measurement (and, shockingly, our criteria wasn’t mentioned) so we can understand how this index of companies was cooked up:

• Training tied to business objectives

• Demonstrable results

• Number of trainers

• Employee turnover and retention

• Leadership development

• Tuition assistance

• Training technology and infrastructure

• Certification

• Training budget and percentage of payroll

Because we know you’re wondering, only two other firms made it on to the list: KPMG at #5 and Grant Thornton at #103. So this begs the question: WTF E&Y and Deloitte? Completely SHUT OUT? Are your efforts being expended elsewhere? Deloitte’s diversity trainings don’t count? What about the Deloitte University plans; doesn’t that count for something? Sorry, E&Y; the donuts and secure bathrooms obviously don’t help you on this list.

Never mind those losers; back in Titletown, you had better believe P. Dubs put out a press release. Our favorite part being the last paragraph before the “About” section where it catalogs every list the firm has ever been on for the past decade and a half. We get the picture P. Dubs. You can make it on to lists. Good job. Please feel free to notify us directly for the next one.

Digitial Issue [Training Magazine]

Dennis Nally: Satyam Scandal Has Damaged PwC Brand

While kicking it in Davos, Dennis Nally had to have known that eventually he was going to have to answer questions about his mother of all nightmares, Satyam. Having just passed the one year anniversary of the cat being let out of the bag about, you know, totally bogus numbers, everyone is talking about it. In India.

CNBC India caught up with Nalls and considering everything that’s going down, DN doesn’t seem worried. He’s leading P. Dubs full steam ahead into India; there’s no crying over failed audits, “Without question the firm has had real challenges in India but that has not changed my outlook and view on the importance of India economy to global economic picture.”


Stoic; as he should be. Not that the firm hasn’t had to do a little damage control. But no worries; Dennis is a man with a plan, “We just need to continue to deliver, service our clients, respond to their needs, help them deal with their issues and challenges. If we do that and we do that consistently over a period of time the PwC brand in India will be as strong and as good as it has been in the past and where we want it to be into the future.”

Plus, this is a blip, an outlier, a rare occurrence, “Any one-off instance can do harm to your brand and that is the reality. Our job is to make sure we are doing everything and we have done a number of things in India to ensure that this would not happen again,” so there’s no cause for concern.

This isn’t Tiger Woods brand damage we’re talking about. It will all be a distant memory before you know it.

Satyam scam has hurt PwC brand: Global Chairman [Money Control]

PwC Accepts Responsibility for Losing Personal Records of Alaska Public Employees

In Alaska news that doesn’t involve Sarah Palin, it emerged late last week that PwC lost the personal records of 77,000 public employees and retirees who participated in the State’s Public Employees Retirement System and the Teachers Retirement System in 2003 – 2004.

Alaska had engaged P. Dubs as expert witnesses in a lawsuit against its former actuary Mercer and turned the data over to the firm for analysis during the discovery process. PwC discovered that the data vanished in December and PwC notified the state last week (nobody wants to share bad news during the holidays).


PwC has accepted responsibility for the whole mess and has agreed to pay for identity theft protection, credit monitoring, and security freezes (if necessary) for the 77,000 employees affected. The firm will also reimburse any losses suffered by any of the participants.

The firm must have realized that there was little upside to disclaiming responsibility, as this would inevitably lead to a sentence in a Sarah Palin speech that involved PwC opposing God, guns, and regular Americans. Populist rancor would ensue and the firm would be run out of Alaska within a week (give or take).

This is the second SNAFU for PwC in the last month. The firm issued a press release on January 15th announcing that someone was sending bogus PwC checks to random people advising them that they had been selected to be secret shoppers. It’s not clear as to whether this is a sign of the wheels coming off or simply bad luck. We’ll keep you informed of any additional slip-ups.

State Acts Promptly to Safeguard Alaskans Against Potential Identity Theft [State of Alaska Department of Law]