Category: The JDA

Transitioning from Typical Accountant to CFO Superstar

Let’s face it, accountants aren’t often featured as heroes in action flicks nor romantic leads in love stories, and are pretty much ignored by the media unless it involves blame and/or complicated financial rules that are just barely an accounting matter (accountants did not securitize every loan nor did some nefarious squad of beancounters dream up Repo 105) so it’s pretty exciting to see the Washington Post heralding accountant turned CFO Carl Adams.


No, he doesn’t have 12 mistresses and he hasn’t gotten any DUIs (that we know of) but the smart professional is cool again. As if he (or she) ever wasn’t.

Carl received his accounting degree from Penn State and, presumably, was really impressed by what he saw when he entered public accounting via Ernst & Young, so much so that he hung around to make senior manager before leaving to do a stint with the SEC.

Transitioning back to the private sector meant applying what he’d picked up from E&Y and the SEC in the capacity of an accounting professional, except plain old “accountant” just didn’t fit him anymore. Perhaps accountants are far more “superhero”-like than we give them credit for? Adaptable, talented, and equipped to deftly switch careers like some folks switch lanes on the freeway; what’s not to admire?

Since most CFOs are professionally qualified to be accountants anyway, a guy like Carl may not seem so spectacular on the surface but when you consider the ever-sophisticated landmine-laced territory of financial statements, there is no such thing as an over-qualified CFO. The definitive line between CPAs and finance professionals slowly becoming blurred and may become non-existent.

Since we know accountants – generally speaking – are change-adverse, why not introduce a more comprehensive curriculum in accounting programs that prepares future CPAs for this diverse, brave new world of accounting and finance to offer them maximum flexibility to transform with the industry?

Sorry for you old schoolers, the green eyeshade has been retired for quite some time: now is the era of the ever-evolving, constantly-changing, ready to head off the next Repo 105 before Wall Street implodes itself again accountant. Movie coming to theaters near you in 2011… in 3D!

Carl Adams: An accountant who yearned to do more finds his calling as a CFO – New at the Top [WaPo]

Three Examples of “Significant Unusual Transactions” that Should Get Auditors’ Attention

The PCAOB issued a friendly reminder yesterday to auditors that sometimes unusual transactions can be cause for alarm and should send the risk red flags flying. Unfortunately, the friendly reminder did not actually mention anything about what “unusual transactions” are but regardless, you better be on the lookout for them.

“The PCAOB’s message to auditors, in this challenging economic environment, has consistently emphasized attention to audit risk and adherence to existing audit requirements,” said Martin F. Baumann, Chief Auditor and Director of Professional Standards.

Since Practice Alert No. 5 (makes it sound kind of hot, don’t it?) warns of the risk of material misstatement inherent to unusual transactions without mentioning what those transactions could be, we came up with three unusual transactions to which the PCAOB could possibly be referring. It isn’t called guidance for nothing, you’re on your own when it comes to determining what qualifies as unusual, little auditors. Hopefully this helps.

• Large and frequent A/P entries to an entity known only as “Candy” (substitute “Bubbles”, “Kitty”, or “Roxy” as appropriate) This is why you have professional judgment so use it, we’re pretty sure even if you haven’t been to a strip club you know what strippers look like on the books and records.

• If you find yourself in a warehouse on December 31st counting an inventory full of dirty bombs, AK-47s, plutonium rods, chances are your entity is engaged in “unusual transactions.” Bonus points for extra unusual if you’re counting that crap and your entity is a church. Red flag, dear auditor, red flag!

• Recurring transactions for “crack” are definitely unusual. You don’t need us to tell you that’s a giant red flag, unless you are auditing under the influence yourself and concerned mostly with where the entity’s CFO hides his stash. Remember also that crack is pretty cheap on the street so repeated transactions will likely fall outside the scope of materiality though a raging crack habit will be material in the aggregate. Adjust scope accordingly.

PCAOB Issues Staff Audit Practice Alert on Auditor Considerations of Significant Unusual Transactions [PCAOB]

Here’s Your Study Plan for the Audit Section of the CPA Exam

Friendly reminder: >75 is here to answer your CPA Exam questions so send them over.

A reader sends us the following dilemma:

“I took the audit section only and failed, most of it was due to not committing enough time to it. If you have any tips to develop plans I would like any suggestions to creating a plan.”

First of all, no offense but I think you have already identified where you went wrong, are you sure you need our help? Oh well.


Let’s talk about Audit, shall we? The average CPA exam candidate will spend 60 – 90 hours studying for the Audit section – that assumes watching your CPA Review lectures 1 time and spending 2 – 3 hours on MCQ/sim practice problems for each hour of lecture. If you are taking the self-study route, you will obviously need to spend more time on MCQ/sims (about about 2 or 3 hours on top of the 2 – 3 you would be doing if you had videos to review) and create a structured study plan based on the most current CSOs (Content Specification Outlines), which you can always find on cpa-exam.org.

Those of you taking exams in early 2011 will want to be on top of exam changes planned to kick in in the first quarter, though the AICPA has been helpful and already released the CSOs for that period.

If you’ve taken the exam and failed, you already have an incredibly useful tool at your disposal – your score report. The report provided after you fail will compare you to other candidates: IGNORE THOSE NUMBERS. Who cares how you did relative to other candidates? All you need to glean from that information is an idea of where your stronger areas are in comparison to your weaker sections. The score report is broken down by different components of the CSOs for that section so obviously you will want to focus harder on areas that you performed poorly in.

About a week or two before your new exam date, give the entire section a once over just to be sure you are also sharp in areas you did well in the first time.

Schedule your new Audit exam AS SOON AS POSSIBLE as the information is still fresh in your mind. If you have a new exam scheduled in the meantime, reschedule it if you can. Unless you REALLY bombed Audit (68 or below), you will want to jump right back in while it is still floating around in your brain.

As for exam preparation and planning, we’ve covered that plenty of times on Going Concern so check out this, this, and this.

Michael Oxley Is Spreading the Good Sarbanes-Oxley Word to Nonprofits

Presented by Serenic Software. Download our free whitepaper – “5 Key Reasons Why Great Financial Management is So Important for Your Nonprofit Now”

If you’re a non-profit leader and free on April 12th, why not head to Washington and listen to Mike Oxley (yes, that Oxley, without whom SOX would still be the property of a certain Chicago baseball team and not the bane of accounting’s existence) speak about transparency and accountability for non-profits?

The ironic part, of course, is that non-profits don’t really have to suffer with the legislation named after Oxley but he’d like to see a little more, well, Oxley in NFP, even if it isn’t necessarily required by law.

[Oxley] will speak about the importance for nonprofit organizations to be transparent and ensure greater accountability with their financial standards to build on and preserve donor trust, strengthen the reputations of nonprofit organizations and associations, and enhance the overall nonprofit sector.

Attendees will include thought leaders from foremost nonprofits, trade associations and key congressional staff members. Both the House and Senate Ethics committee’s staff have deemed this a “widely attended event.”

My feelings on Sarbanes-Oxley have been expressed more than once here on Going Concern but I can sum them up thusly: more useful things could be done to “protect” the investor interest besides arcane SOX compliance and the PCAOB including but not limited to random auditor cavity searches, TSA-style interrogation of management, and waterboarding the internal audit team. Is Oxley trying to imply that non-profits should follow suit but only voluntarily and out of obligation to donors instead of investors?

Surely his plan is not that sinister.

Only because non-profits already have their own version of SOX in the Form 990 (which I have complained about before as well) that has all of their bases covered. The only SOX carry-overs are strengthened whistleblower protection and retention of documents in lawsuits, perhaps because non-profits may have been where Mike Oxley got his ideas.

SOX compliance costs averaged $2.9 million during fiscal year 2006, actually down 23% from the fiscal year previous according to FEI. Do you know many nonprofits who have that sort of cash lying around?

I think it might be better to get some advice from the guy who wrote the bill and start tightening up the ship just in case.

Recommended reading by April 11th if you’re checking out Oxley’s “I just want to be helpful” presentation: The Sarbanes-Oxley Act and Implications for Nonprofit Organizations (last updated January 2006). Bring a notepad.

Former Congressman Mike Oxley to Speak at Nonprofit Summit [Council for Non-Profit Accountability]

Let’s Take a Closer Look at This Shia LaBeouf and InterOil Situation

There’s some funny business going on in InterOil and a lot of it is pure juvenile humor. First of all, you have Louis from Even Stevens pumping their crap stock. Then you have him in Playboy saying he’s less than well-endowed.

It’s as if the jokes write themselves but then you realize that investors are actually counting on the soundness of markets and suddenly it’s not so funny. Never mind, it’s funny.


The first problem with InterOil isn’t really that the guy from Transformers is clumsily pushing it now that he’s worked beside the real Gordon Gekko – sure Wall Street is cool again but not cool enough to rub off on Shia LaBeouf who has apparently taken to pumping stocks lately.

Yeah, we know, we’re confused too.

Getting ready to play next to Michael Douglas for Oliver Stone’s “Wall Street” sequel “Money Never Sleeps”, LaBeouf studied under the financial ninjas at John Thomas Financial (yes, JDA already made that joke. A bunch of times) and apparently turned $20,000 into $489,000 says Business Insider.

And yes, he really did tell GQ readers to grow some balls and short gold at 120 (whatever that means). 120 what? Euros?

“He’s So Money” says GQ in the April 2010 issue. Give me a break. From the mouths of garbage-stock-pumping babes:

“I thought my life was pretty wild. I’m Richie Rich. I land in New York, secretly thinking I’m like the coolest guy in the world. I’ve been on the cover of GQ! But then I met these guys, and it’s humbling. It’s the most sex-drugs-and-rock-‘n’-roll atmosphere that exists on the planet. I was hanging out with some wild human beings.”

So we’ve established Shia is a douche but what about InterOil’s “fundamentals”? I’m so glad you asked!

How about this “bad faith” bankruptcy filing by InterOil’s esteemed CEO Phil Mulacek?

InterOil also recently announced a that part of the Antelope-2 well will need to be re-drilled, greasing it up further for 14-year-old humor for months to come. For 7 years InterOil has promised awesome discoveries and for 7 years it has failed to deliver. Since we no longer have logical fundamentals (InterOil outperformed well through 2009), the best we can do is juvenile humor, I guess.

Grow some balls and short InterOil or just sit there and wait for it to implode, up to you.* Shia needs to hurry up and jump on the tax problems bandwagon like many of his fellow “stars” so we don’t have to listen to this anymore. Wonder how much his toilet seat collection would snag at IRS auction?

Earlier: QOTD: Sam Antar is Ready to Rumble

*Disclaimer: nothing here should be taken as investment advice and I don’t take back what I said about Shia’s John Thomas nor his Financials.

Three Ways to Get Back into Study Mode for the CPA Exam

Masochism at its finest means just thinking about the CPA exam while fully head down, eyes closed and trudging towards the busy season finish line. It’s cool, CPAs are a masochistic bunch and if you’re going to subject yourself to the torture of studying for the CPA exam while tackling your least favorite part of the year, have at it but please be smart about it.

It’s almost April and you know what that means – a brand new testing window filled with fun and exciting >75 action. Hopefully 75s, if you little masochists plan right.


Here are a few tips, you can do whatever you want with them. Ideally, you can ignore them for the next few weeks until you shift from busy season mode back to exam mode.

• Don’t be unrealistic about your work load – Some of you complain about “busy season” and know damn well you haven’t pushed a difficult piece of paper in months while others haven’t seen the light of Facebook (nor the end of the tunnel) in weeks. Take a reasonable assessment of the free time you have to commit to the exam and plan accordingly. If you’re grinding all the way through April 15th, maybe a late April test date is a tad optimistic and not all that smart.

• If you aren’t ready, blow it off – This goes against everything I always recommend to CPA exam candidates but it’s a wise piece of advice this time of year. If you are not ready for an exam, try to reschedule. Maybe taking FAR on April 1st made a lot of sense when you scheduled it in October but now that April is almost here and you haven’t seen daylight in two months, it’s not looking like such a bright idea. Of course, if you’re in a situation where you are about to lose credit for exams previously passed but still not prepared, there’s no harm in going to the exam anyway as you’re basically forfeiting the exam fee and might as well find out what’s on the test for next time.

• Don’t permanent vacation yourself just because you’re tired – Shifting from busy season to exam mode, it is really easy to rationalize an extended vacation from studying just because you need a break. The rest is deserved but don’t let a few days of relaxation turn into several months of procrastination. It’s easier than you think and I’ve seen it enough times to know it happens all the time. Don’t be lazy, this is what you wanted.

AICPA Pushing Members, Small Business to Adopt More Cloud Solutions

The AICPA is in the cloud and wants you to join them, accounting industry. Being a preferred financial application for the AICPA can pay off so before you start ripping on accountants remember they (and especially their clients) have a metric shit ton of money.

The technology push came quite some time ago (XBRL anyone?) and CPAs are generally on top of it. You can’t get them to blog (Tracy Coenen can tell you more about that) but you can definitely get them worked into a lather over something that will make their lives easier.


Intacct is learning what being on the AICPA’s good side can do for one’s business.

CFO.com:

The American Institute of Certified Public Accountants is pushing to accelerate adoption of cloud solutions among its 350,000 members, focusing especially on small and midmarket companies as well as CPA firms. The AICPA’s first official endorsement of a cloud vendor, payroll solutions provider Paychex, came several years ago. But the institute has rolled out more such partnerships with increasing frequency, including with bill.com for invoice management and payment in 2008, financial management and accounting software maker Intacct a year ago, and tax-automation supplier Copanion at year-end 2009.

Intacct president and CEO Mike Braun was beside himself when the AICPA began pushing his product, acknowledging that an endorsement from them meant unprecedented reach in the industry. Awesome, the AICPA has finally joined with technology instead of fearing it. How dare I make broad generalizations about the AICPA’s conduct over the past few years?

A previous example of the AICPA’s tech phobia: It only took them 6 years to figure out what to do with BEC on the computerized CPA exam and they still aren’t sure how to treat it. No one is bitter but it’s a tad disturbing that CPAs were taking a professional licensure exam with paper and pencil up until 2003. They’ve had all this time to assemble BEC into something that isn’t the CPA exam’s junk drawer but still can’t manage to cobble together a storyline for the section.

One can only hope that the cloud can get the AICPA BoE to have an epiphany on that point. In the meantime, this is one hell of an endorsement so good for technology but even more credit is due to the AICPA for getting with 2008.

Then again, you have guys like GNU founder Richard Stallman and Oracle’s Larry Ellison who say cloud computing is “complete gibberish” and nothing but a slick marketing campaign for pricey third-party software. “Somebody is saying this is inevitable – and whenever you hear somebody saying that, it’s very likely to be a set of businesses campaigning to make it true,” Stallman told UK’s Guardian. Wait. Are you telling me the AICPA would engage in such shifty behavior just to make a few bucks?!

Nahhhhhh.

CPAs Spanked by SEC for Porn Site Audit

Let it be known that if you are peddling porn and engaged in online pimping, you do not want the SEC on your back.

WebCPA reports that Stephen Corso of Las Vegas and Brian Rabinovitz of Oak Park, CA got the SEC smack down in a Nevada federal court for filing materially false and misleading financial statements from 1999 – 2002 (that’s quite a backlog) and that audit staff – under the boys’ supervision – omitted important info and violated the sanctity of auditor independence during audits of Exotics.com


While the enforcement doesn’t go into specifics, we’re happy to. Exotics.com bills itself as the world’s premiere source for – wait for it – beautiful female adult entertainers. Not to be outdone, Exotics also boasts a veritable cornucopia of escort options including “BDSM & fetish providers, exotic dancers, strippers, sensual and erotic massage specialists, TSTV and other adult entertainment.” It’s that “other that really scares me. Self-billed as the Quicker Pecker Upper (kid you not), the site headline right around the time the SEC brought the heat was “Better than Wives, Girlfriends, and Porn” – and apparently above performing audits according to GAAS?

So, who wants to wildly speculate as to how audit staff violated auditor independence?

Here’s the 2005 release from our friends at the SEC:

[T]he accountants fraudulently participated in audits of Exotics-Nevada’s year-end financial statements and in a review of its quarterly financial statements and failed to conduct those engagements in accordance with GAAS, as required. The Commission also alleges in its complaint that, among other things, the accountants prepared or created many of Exotics-Nevada’s books and records and then audited the financial statements they created. According to the complaint, they also caused their firms to issue false audit reports which, together with the underlying financial statements, were incorporated in Exotics-Nevada’s public filings with the Commission.

Now listen, little auditors, you don’t shit where you live and you don’t audit your own statements. Audit sampling? I could see how it would be hard to resist in this particular instance.

CPAs Disciplined for Porn Site Accounting Fraud [Web CPA]
SEC Complaint

Are Too Many People Passing the CPA Exam?

The AICPA recently announced that it would be re-evaluating the CPA exam scoring process and we’ve been wildly speculating awhile as to what that might actually mean. Staying true to the doom and gloom, yours truly immediately thought the AICPA Board of Examiners was convinced you kids would bomb FAR horribly in Q1 and 2 of 2011 with the addition of IFRS and they were just preparing for that.

Upon further reflection, maybe the exam is too easy. Maybe requirements to sit are not strict enough (even though we’re down to 4 states that allow you to sit with 120 units last I checked). Maybe the job market is worse than anyone wants to admit — now wait a minute, what does that have to do with it?


There isn’t raw data that tells us how many would-be CPAs we have on our hands who have passed all four parts of the CPA exam but still can’t get a job, at least none I’ve seen. I’ve spoken to these people and it doesn’t seem to be getting better in the aggregate.

I believe the BLS numbers somewhat concur with this conclusion, if you can believe them. (CPA Trendlines has them)

I hear you guys bitching about it all the time. If you’re still employed and trying to take the CPA exam, you get the extra special designation of ultra-masochist but it’s not you guys the AICPA BoE is worried about, it’s the bottleneck of people who’ve passed the CPA exam trying to squeeze in 2 years in public to get a license.

Case in point, a friend of mine here in the great (broke) state of California decided to take on the CPA exam a tad later in life than some of you. We won’t hate on her for that. She worked her ass off and eventually got through it. She’s a leader of a prestigious accounting society in her community and has the credentials a lot of the kids coming out of school don’t. She can’t find a job. She’s tried every firm in town large and small as well as the surrounding area. I’ve scouted the Bay Area and can’t find anything for her either.

She’d stay more than 2 years and be more than a body filling the chair but they don’t even have a chair for her.

She’s not the only one. So maybe the AICPA BoE caught on and is going to try to change that. They can’t create the jobs so what do you think they’ll do?

Oh, and if anyone has a lead on a public accounting gig in the top half of California for my qualified little friend here, do get in touch.

Sam Antar Is Still Waiting for an Apology from Patrick Byrne and By the Way, Has Never Engaged in Naked Short Selling

Sam Antar knows an accidental criminal hero when he sees one: his cousin Eddie Antar was hailed as a champion of cheaply-priced consumer electronics in the Crazy Eddie days, though the poor saps in New York didn’t realize he could price his goods so cheaply because he was stiffing the government on sales and payroll taxes. Patrick Byrne and Overstock.com are pushing to corner the accidental criminal hero market by denouncing the evils of naked short sellers (bad bad bad), of which they seem to be convinced Sam is one.

While we’re on the topic of OSTK’s campaign to end evil naked short sales, I hereby volunteer to help Overstock edit their naked short selling page, by the way, as it’s not only a dry read but a tad poorly-written. Just sayin. Helpful girl that I am, it’s the least I can do.


Anyway, Sam’s still waiting for his apology from Patrick Byrne but in the meantime, would like him to take back those mean things he said about Sam naked shorting them to death. In an email to the SEC, Byrne himself and Overstock.com audit committee member Joseph Tabacco this weekend, Sam sets the record straight:

First off, I have never been involved any illegal naked short selling.

Second, how can Overstock.com label me as an “anti-Overstock.com blogger” when:

I correctly reported in my blog that Overstock.com used an improper EBITDA from Q2 2007 to Q2 2008 in violation of SEC Regulation G to materially inflate its financial performance, in light of its later amended disclosures.

I correctly reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement.

Third, please note Utah Attorney General Mark Shurtleff received $5,000 in cash from Overstock.com a few days prior to writing his defamatory letter about me. Both Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp acknowledged that Shurtleff’s claims about me were false in various tape recorded conversations cited in my blog.

Sam goes on to explain that he’s actually doing Overstock a favor by uncovering fraud that its own audit committee has seemed to, um, overlook. You know, so they can set themselves right with the SEC and skip the restatement next year, filing all those extensions can get pricey and time-consuming you know.

See, Patrick, why so hostile? We’re all just trying to help!

Three Ways the CPA Exam Could Change in the Near Future

If you’ve been trying to pass BEC since the CPA exam went computerized in 2004 (you can laugh all you want, I know a few people…), rejoice! The AICPA, NASBA, and Prometric have committed to another 10 year contract to administer and oversee the computerized CPA exam in 55 US jurisdictions.

“This 10-year extension of the exam contract from 2014 to 2024 continues the close and highly successful collaboration of the three organizations in the delivery of the computer-based examination for the past six years,” said Barry Melancon, AICPA president and CEO. “The CPA exam is the gateway to the accounting profession and under this arrangement we have seen the exam improve and grow. About 93,000 candidates took the examination in 2009 – a record.”

Now we imagine it must have been editorial privilege to leave out the actual passrates of those 93,000 2009 CPA exam candidates and we’ll not wildly speculate that the record is a direct result of threats that the exam will be jam-packed with IFRS come 2011.

What will the CPA exam of 2024 look like? Obviously no one knows but looking at the evolution of exam content since 2004, we can take a stab at guessing.

• BEC will be a big priority – As we move from two simulations in FAR, AUD, and REG to 6 “simlets” (smaller, unrelated simulation problems) with communications being moved to BEC, I imagine it will be a big priority for the AICPA. It’s been notoriously “random” and filled with the bits and pieces that the AICPA couldn’t seem to make relevant in other CPA exam sections; the junk drawer of the exam, as it were.

• IFRS – A lot is riding on implementation of IFRS questions (anyone volunteered to write those yet? I think the AICPA is still patiently waiting for help).

• Scoring discussions planned after the first two quarters of 2011 – In other words: if you guys do well, the AICPA might leave it alone. Bomb and they might have to consider grading on a curve, invalidating that whole psychometric testing thing they’ve got going now.

Good luck with that. Really.

CPA Examination Contract Renewed in the U.S. Through 2024 [Press Release]

Three Ways That Patrick Byrne Can Apologize to Sam Antar

As you’re probably aware (if not, check the links below), it hasn’t been the friendliest of exchanges between criminal CFO/forensic accounting sleuth Sam Antar and Overstock.com CEO Patrick Byrne. Sam being Sam, he recently reached out to Patrick Byrne to see if he would be interested in a mea culpa:

From: Sam E. Antar
Sent: Monday, March 08, 2010 11:02 PM
To: Patrick M. Byrne
Subject: Overstock.com Restatement
Importance: High

Hi Patrick:

Will you finally admit that I was correct when I reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement?

You owe me a public apology.

Regards,

Sam


Our understanding is that Pat hasn’t responded to Sam’s request for an apology yet (we’re hopeful!) so Team GC thought we’d offer some suggestions to Dr Byrne should he decide to take the high road and apologize to Sam. Having been in this situation more than once myself, I can honestly say sometimes you’ve just got to suck it up, buy some flowers, and admit that you’re an ass but totally repentant.

Overstock.com gift cards – Nothing says I’m sorry like free stuff that the aggrieved party can pick themselves. Bonus, the overhead on Byrne’s own inventory must be low. You know, because it’s his, not because there is any monkey business going down on OSTK’s financials.

An SEC Gift Shop Goodie Basket – I busted Sam in an SEC baseball hat at Stanford last week so wouldn’t it be cute if Byrne got him a whole basket full of fun regulatory shwag? Awww, what a precious moment it would be watching Sam pull out DoJ beer cozies and a color-changing SIGTARP coffee mug. Who doesn’t love tchotchkes? PB can’t go wrong! I’d even throw in a pair of NY Fed Pistol Team patches for that added touch of flair.

Cupcakes – Come on, no one can resist cupcakes, not even Sam E. Antar’s hardened criminal ass. You know, might as well send some to the GCHQ while he’s at it, we’ve been putting up with this Overstock shit for months too. Hopefully even Patrick Byrne knows when it comes to cupcakes, it’s best to invest in high quality, over-priced boutique cupcakes. Even my cheap ass knows that.

Earlier:
Winners and Losers in the Overstock Restatement
Even Earlier:
Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?