Accounting News Roundup: Japan Adopting International Fair Value; GAO Not Down with PCOAB Risk Standards; Oscar Gift Bags = $91k Income | 03.08.10
• Japan embraces new fair value rule [Financial Times via Accountancy Age]
Here’s a novel idea: making a decision on IFRS! Japan’s Financial Services Agency will be allowing companies to adopt the international version of the new fair value rule developed by the IASB, starting Wednesday. Since the world’s second largest economy is opting to pull the trigger on IFRS it may throw the G20’s request/demand for the world to get all kumbaya when it comes to accounting rules.
“Fair value accounting…as unleashed one of the most divisive debates to have emerged from the credit crisis, threatening to disrupt a pledge by the G20 group of leading economies to create a single, global accounting system by mid next year,” reports the FT and judging by the SEC’s indecisiveness, they may be right. With this latest development, now leaders will be able to blame each other’s securities agencies for their particular actions that will likely lead to divergence.
The allowance of Japanese companies to adopt IFRS 9 could also give Knight of the Accounting Roundtable, Sir David Tweedie, even more leverage when dealing with countries around the world to adopt the IFRS.
Right or wrong, the Japanese are sending a signal that they are prepared to move forward while the SEC prepares to have more meetings.
• GAO Criticizes PCAOB Approach to Audit Risk [Web CPA]
The General Accountability Office, never shy to point out the faults of others (that’s kind of what they do, after all), isn’t so keen on the PCAOB’s latest “risk assessment” audit standards. This after the PCAOB originally proposed standards in 2008 and then revised and re-released them late last year.
The GAO feels that the ‘duplication and inconsistencies’ created by the PCAOB’s new standards would likely lead to…more billable hours! So, as you might imagine, some firms are on board:
PricewaterhouseCoopers told the PCAOB, “We fully support the board’s objective to update interim standards regarding risk assessment,”
And some, not so much:
McGladrey & Pullen…warned that “unnecessary differences between the board’s standards and those of other standard-setters increase the costs of performing all audits because firms must develop and maintain two, and even three, audit methodologies and training programs, with no corresponding benefit to audit quality.”
Personally, we’re skeptical of anything that has the unmitigated support of the biggest players in the industry but from a more practical standpoint, do auditors really need more rules to follow? And now this could add to the workload? Is that really necessary?
• Oscar Swag Bags to Result in $91k Income to Celebrity Presenters [TaxProf Blog]
Celebrities have enough tax trouble the way it is, how is giving them gifts going to make their tax returns easier? We’re guessing most of them have smart CPAs working for them that will suggest that they give it all to charity but we may be underestimating the temptation of free luxury swag.
Stephen Chipman Managed to Not Stop By Going Concern HQ While He Was in New York
This week in Stephen Chipman blog dissection, we learned that SC had another week full of travel, although he managed to resist the temptation to head back to Atlanta for the third straight week. It was typical back-slapping, glad-handing wily CEO shenanigans in Chi-town including a little chat with Assistant Secretary of State for East Asian and Pacific Affairs, Kurt Campbell. “Dr. Campbell recounted a wonderful story of his very first diplomatic event with Secretary Clinton at Blair House — entertaining a senior Chinese delegation.”
Yeah. He leaves you hanging. Our guess is that Hil was telling Bill jokes and/or doing armpit fart noises but it’s all a mystery because Stephen changes the subject entirely. C’mon man! You can’t do that!
Anyway it and then on to DC for a speech IFRS and why it’s on the road to nowhere in the US of A:
I had been invited to be the after-dinner speaker for the National Venture Capital Association (NVCA) Board of Directors meeting. Although I feared the impossible expectation of being a “rousing, after-dinner” speaker on the topic of International Financial Reporting Standards (IFRS), interest was high on the eve of the SEC’s highly anticipated announcement of plans to move forward with their Roadmap for IFRS adoption in the United States.
We’re continually impressed with Steve’s ability to throw in the dry humor, although we suggest dropping the unnecessary quotation marks. Definitely would read more deadpan. If you’re not familiar with the phenomenon of unnecessary quotation marks, you’re probably an abuser.
Moving on…
Chiparoo then trekked up to the City where he talked more about IFRS with the Center of Audit Quality, “The lively conversation focused on the SEC’s announcement regarding further clarification on their Roadmap.” And by that he means everyone there is pissed that the SEC is perfectly happy to drag this thing out.
Post-IFRS chat, SC met up with Ed Nusbaum and they did some MSM hopping, “I met up with Ed Nusbaum and Grant Thornton’s Director of Corporate Communications John Vita for a media tour. Ed is a veteran with the press, but press junkets are relatively new for me. We spoke to reporters at Bloomberg, Fox News, the Wall Street Journal and Thomson Reuters.”
Okay, we’re a little hurt by this. Sure we work remotely but would it have killed you to stop by Steve and leave a note? GCHQ might not have the fancy confines of the WSJ or the ‘Berg but we’d make you guys comfortable as possible. Plus there’s always stimulating conversation. Or just simple call saying “Sorry we couldn’t make it. Next time!” just to get our hopes up.
While we’re still getting over this little slight, we’ll just mention that Steve’s blog, to our knowledge, doesn’t have a name. We’ll take the weekend to mull over this but in the meantime, if you’ve got suggestions, feel free to share.
Five Questions with Accounting Professor David Albrecht
You might know him as Professor Albrecht (at least I still call him that) or you may read The Summa and have no idea who the guy is.
JDA recently forced him to answer some questions to get to the man behind the adamantly anti-IFRS curtain we love so much and discovered he’s proud to be a dissenting voice in the argument over global accounting standards convergence and then some.
First of all, Prof Albrecht is way more old school than just about anyone. He was “blogging” on listservs before there was a such thing as a blog and Caleb and I were still playing 8-bit Super Mario Bros.
Alright, maybe we’d advanced to AOL by the time Professor Albrecht was set loose among hundreds of accounting professors from around the world, the point is he’s been around. The Summa is only about a year and a half old but if you’ve ever read an accounting blog, chances are you’ve seen his work.
Secondly, he’s got opinions and lots of them. Better yet, he enjoys being a teacher; spreading the knowledge both to his own students and the “students” around the world who read The Summa regularly. That means he’d be happy to teach you why he feels the way he does but won’t hold it against you if you feel differently. That’s an admirable quality, and only part of what makes him one of my favorite accounting bloggers.
He also takes interrogation well.
Why do you blog?
I believe that writing something down helps you put your thoughts in order. Writing actually helps me figure out what I think about something. I want to make a difference. Blogging about IFRS is a way of drawing attention to the “other” side of the issue, the one you don’t hear from the large accounting firms or the SEC or the IASB or the EU.
Why should you accountants read your blog?
To find out an accounting professor take on accounting/business/finance issues. I’ve been on an e-mail listserv with hundreds of accounting professors from around the world for 14 years in the thick of many discussions. I take what I learn from these discussions and bring them to The Summa.
If someone had to read just one post of yours which one would it be?
I’ve written dozens of posts on IFRS, and you want just one? Dave Albrecht–IFRS Critic
A good accountant is…
Someone who can tell left from right.
Best Accounting firm program we’ve never heard of…
The Concordia College (Moorhead, MN) accounting major.
Hotel Doesn’t Like Being Duped by a Phony IRS Agent; Manages a Nonviolent Response
About a month ago we briefly mentioned Sheryl Lynn Vertoch who had been “staying at the Inn Marin Hotel in Novato, California for over seven years telling the staff there that she was an IRS agent.” Her cover was blown, not by hotel pool boys turned crack-squad investigators, but by the hotel calling the IRS to complain about their lack of support for this public servant that worked on important cases such as Enron.
Probably feeling a tad sheepish, the hotel is firing back by suing SLV for the $55,175.25 that she owes the hotel.
The hotel, being very thorough of its records (but not necessarily multi-year guests) attached a 24 page invoice to show the charges that Vertoch racked up for “guest fees, expenses and pet charges” from January 21, 2008, to January 26, 2010.
Somehow the hotel’s management/owners/lawyers came to the conclusion that A) the actual IRS wasn’t the cause of the problem and B) the use of a plane, bulldozer or firearm were simply not the best course of action.
Personally, we’re shocked but at the same time relieved that there is a sliver of sanity left in this country.
Novato hotel wants IRS imposter to pay $55,000 tab [Mercury News]
Earlier:
Phony IRS Agent Racks Up $55k Hotel Bill
Former Andersen CEO: Greed Brought Down Firm
Retired Andersen CEO and Managing Parter, Duane Kullberg was part of a panel discussion that went on at Carthage College in Kenosha, Wisconsin this week where he was the featured speak on the “The Rise and Fall of Arthur Andersen”.
Mr Kullberg was part of a panel that included our friendJim Peterson of Re:Balance and Bill Goodman, President of Schneck SC, a firm with offices throughout Wisconsin that also discussed the future of the audit profession.
Mr Kullberg served as the Andersen CEO from 1980 to 1989 but “the profit-driven company culture in the 1990s, that valued sales more highly than the ethically rigorous auditing practices that built the accounting firm,” was ultimately brought the firm down.
The greed came from the development of the consulting business that became a signficant part of Andersen’s business during the 1980s:
By the time Kullberg took the reins, Andersen was an international player, increasingly involved in providing consulting services. By 1988, it was the largest consulting firm worldwide, deriving 40 percent of earnings from that side of the business.
That brought growing demand for greater independence and a bigger piece of the money pie from partners on the consulting side, while those on the tax-audit side militated against revising the company’s historic approach to treating all partners as financial equals.
So the seeds for the firm’s demise were planted long ago and it was due, dare we say, partners that were jealous over the booming consulting side of the house. After Kullberg split the consulting from the audit/tax the feuding got bad and lawyers got involved. Then the bright idea of rebirthing the consulting business within the audit/tax firm came about:
Under Kullberg, two operating units were created: Arthur Andersen, the tax-audit/accounting group, and Andersen Consulting, both under Andersen Worldwide, each under its own managing partner.
The equal compensation system also was revised, with funds being set aside to reward individual partners and teams of partners for superior performance.
Fissures widened dramatically in 1997 when Andersen Consulting (now Accenture) won an arbitration against Andersen Worldwide and broke off on its own after the tax-audit group set up its own competing consulting service
“All of a sudden, they went back into the arena of business consulting. It was untenable,” Kullberg said.
The rest of this story is well-known. If not, there’s a play coming out this spring. That should catch you up.
Accounting for greed [Kenosha News]
Carthage welcomes Duane R. Kullberg [Carthage College]
How Huge Companies Are Dragging Down Our Economy
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
There are three pieces in the blogosphere today that touch on the fundamental problem with our economic system and why it will remain in a ditch, or just lurch onward to the next crisis, if it isn’t addressed.
And that is monopoly. I’ll leave aside the politics of that, which is addressed well enough by Thomas Franks over at the Wall Street Journal. In a nutshell, he warns of a return to feudalism, which I’ve done as well before.
What struck me as new was this analysis, which made me realize that the macroeconomic problem with monopolies is that they discourage hiring and capital investment.
After all, if you have a market locked up, your profits are so high that it makes no sense to take any risk on new investment. You just keep doing what you’re doing with the resources you have, hoping to maintain your barrier to entry. Oh sure, you expand, but only by acquiring competitors so as to keep your monopoly intact and your margins high.
Capital investment? Hiring? Forget about it. There’s no need. In fact, you want to reduce those things. That’s called synergy.
So where does expansion in GDP come from in that case? It derives more and more from speculation about where your stock price will go. Multiply that to the nth degree, a process known as financialization that’s been taking place for decades, and everything ultimately becomes geared to asset prices, with the bubbles and busts that inevitably ensue.
Yes, this description is woefully simplistic and won’t pass muster in a traditional macroeconomics course. There’s also plenty of room for argument as to what degree monopolies currently dominate the economy.
But it seems to me that this is the sort of analysis that’s required to restore the economy’s health. How else, after all, can one explain the paltry amount of hiring and capital investment we’ve seen since the late 1990s?
The point of such a discussion, of course, would be to come up with a solution to the problem. As cogent but unfashionable as its description of the problem may be, the Marxist view expressed in the Monthly Review article cited above is that it cannot be solved because of the irreconcilable contradiction at the heart of capitalism, and that political instability of the highest order is thus inevitable. Sorry, but no thanks.
The alternative: Vigorous antitrust enforcement, which, as Simon Johnson of MIT points out, is what the progressive Republicans pursued a century ago when financial trusts threatened to put a stranglehold on the entire system.
Indeed, breaking up monopolies, in banking and elsewhere, strikes me as the only viable means of growing the economy without creating a more dangerous asset bubble in short order.
Yes, you could conceivably do it instead through better regulation, and I’m all for that, but the back and forth we’ve seen in Washington over financial reform shows that better regulation is impossible until the economic power of the banks, and the political influence that goes with it, is sharply curtailed. The Federal Reserve and other bank regulators had all the authority they needed to keep banks in check, but failed to do so. Why? It wasn’t because they were dumb.
More Sue Sachdeva Fallout: Koss Resigns as Strattec Audit Committee Chair; Grant Thornton Dismissed as Auditor
The Sue Sachdeva wrecking ball continues to do damage as we learn today that Michael Koss has resigned as the audit committee chair of Strattec Security Corp. Oh, and Strattec also dismissed Grant Thornton from its audit duties for the Company, saying that “[it] decided to consolidate all of its outside accounting/auditing work with Deloitte”.
And yesssss, Michael Koss resigned, at least in part, due to the uesay achdevasay tealinsay oneymay:
David Zimmer, Strattec’s new audit committee chairman, said the problems at Koss Corp. played a role in Michael Koss’ decision to step down as the committee chair at Strattec. He said audit committee chair is a demanding and time-consuming job. “Everyone has to evaluate how much time they have to spend on things,” Zimmer said.
So in other words, you’re saying that Mr Koss, who by all accounts wasn’t spending any time keeping an eye on his own company, can’t be expected to serve as the audit committee chair of this company since it’s kinda sorta an important position. We get that.
As for GT, Pat Hansen, Strattec’s CFO said that this was something the Company was ‘mulling’ over anyway and that the Koss fiasco and the timing of this dismissal were ‘more coincidental’. Okay but it the made the decision a helluva lot easier, didn’t it?
And the Sue trainwreck rumbles on…
Koss resigns as audit committee chair at Strattec [Milwaukee Journal Sentinel]
Recent Koss/Sue Sachdeva News:
Koss Sues AMEX for Sachdeva Spending Spree
Koss: Financial Results Will Be Better Now That the Whole Fraud Thing Is Over
Grant Thornton Is on This National Employee Appreciation Day Thing
So, servants of the capital markets, how’s the motivation? Stable? Critical? Grave? Whatever your condition, if you work at Grant Thornton, you’ll be happy to know that there’s a chance (somewhere between slim and good) that you’ll receive a little token of appreciation tomorrow:
Exciting, right? We’re not sure these GT e-cards are of the erotic variety but that would definitely be a great show of apprec t have the self-control to forward it to your non-GT address and wait to check it at home so you don’t end up like some people.
Turns out National Employee Appreciation Day has dropping on the first Friday in March since 1995 but we’ll be damned if we’d ever heard of such a thing. Is there some coordinated effort among accounting firms, large and small, to keep this thing as quiet as possible? It’s busy season after all; the close proximity to deadlines should be appreciation enough.
Anyway, Recognition Professionals International put this together back in the Clinton days and presumably it’s been a hit because, well, it’s still going on. Jump over to the website however, and you’ll find out that they have far bigger ideas that just e-cards:
Recognition can take a hundred forms and variations. Here are just a few ideas:
1. Ask an employee to write down six ways they would like to be rewarded. Anything goes. The only rule is that half the ideas need to be low cost or no cost.
2. Schedule lunch dates with employees. Give them an opportunity to select the luncheon site, and use the time to simply get to know them better.
3. Offer a free one-year subscription to an employee’s favorite business magazine and have it sent to their home.
4. Consider a gift certificate entitling an employee to lunch with you or another mentor of his/her choosing for the purpose of being coached on one or more topics.
5. Offer a shopping spree to a local supply store for an employee to get items (no staplers or paper clips allowed) to personalize his/her office or cubicle.
6. Give the gift of wellness. Have a limousine pick up an employee for a full day at a spa. Give gift coupons for ballroom dance, yoga or golf lessons.
7. Give a fun-loving employee a series of On your mark-get set-GO cards that they can redeem at their discretion. For example: Leave work early to go to a movie, or shopping, or play ball.
8. Send a handwritten note of thanks for the completion of a job well done.
9. If an employee stays late/goes above and beyond to complete a project, send the employee and his/her partner to a nice dinner.
10. Purchase a company “toy” your employees would most enjoy; a cappuccino machine, dart board, volleyball court, exercise room.
Now judging by this list, it appears that GT looked through these and thought, “Number 1 could be taken advantage of in ways that could get the firm in trouble (wink-wink, nudge-nudge) and the rest of these involve spending money. With the exception of number eight!”
So an idea was born. GT e-cards. Here’s hoping that you all get an inbox full of these because A) you deserve them and B) the better the odds are that someone will forward it on to us so that we may take a gander and then share it with everyone. If you don’t receive a GT e-card (or anything for that matter), then you have every right to go postal on whoever you damn well please.
AIG Keeps the Populist Wrath at Bay with Latest Deal
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
I’ve previously railed against American International Group for dragging its feet in repaying the $180 billion it owes to the U.S. government, so I need to tip my cap to it for the $35.5 billion deal it struck with Prudential for its Asian insurance division.
And unlike some previous deals, AIG will use a major chunk of cash from the sale of the unit — $25 billion — to pay down a credit line it has with the Federal Reserve. (The insurer will take the remaining $10.5 billion in Prudential securities.)
It’s a move the company had to make, really, especially as it continues to lobby against the pay caps the government has imposed.
“This diminishes the wrath directed at AIG from Americans angry at the bailout,” Clark Troy, a senior analyst with research firm Aite Group, told Bloomberg.
The anger directed at financial institutions is a big deal. Just ask Goldman Sachs, which listed “negative publicity” in the risk section of its recently filed 10-K.
So while AIG had previously done a number of relatively minor deals — at least minor compared to its indebtedness to the U.S. taxpayer — the insurer finally made a major act of good faith. Indeed, the unit was considered its crown jewel and Thomson Reuters data showed it was the largest insurance M&A deal ever.
But here’s hoping the company doesn’t take what little good will it will gain from the deal for granted. There’s still the matter of more than $100 billion left.
SEC Deadline Watch: Filing Late? Your Life Isn’t Over
Hey CIT team, sorry to hear about the tardy filing. But you know what? Considering all that’s happened in the past year, filing a couple weeks late isn’t that bad. And besides, now that John Thain is running the show, all signs are pointing to a turnaround of epic proportions.
For the rest of you engagements teams that have a late filing, you might have been feeling like LOSERS last night and maybe you spent last night sobbing over it and now it’s carrying over to today. We’re here to give you permission to blow it off.
We realize that doesn’t help the attitude of your [insert pissed off team member] right now but you know what? Shit happens. They’ll get over it too. Will this affect your performance rating? Maybe. Maybe not. One thing is for sure though, there’s plenty of blame to go around so if you’re feeling guilty, knock it off. Will you get shipped off to an engagement where auditors go to die? It’s possible but you’ll probably be better off.
So maybe it feels like the end of the world right now but whatever your sitch is, we assure you, it’s not. This isn’t life or death. You’ve got to work at the IRS to make that claim.
CIT Unable To File Annual Report On Time Monday [Dow Jones via WSJ]
CIT Form 12b-25 [SEC]
SHOCKER: GAO Says the Federal Government Has Weak Internal Controls
Talk about a blow. Everyone here at GC soiled themselves after finding out this piece of news.
The mother of all auditors, the General Accountability Office, released its FY 2009 Financial Report for the U.S. Government last week and things are, shall we say, typical. How typical? How about things are such a mess that the GAO can’t render an opinion on the consolidated financial statements?
“The U.S. Government Accountability Office (GAO) could not render an opinion on the consolidated financial statements of the federal government (other than the Statement of Social Insurance) because of widespread material internal control weaknesses and other limitations.”
That’s from the press release and while we were expecting a shitshow spread amongst all the agencies of the government, it’s due to the weaknesses in four agencies: the Defense Department, Homeland Security, State Department, and NASA.
Here’s the full rundown on the agencies from the report:
You may remember us noting the Defense Department’s audit problems back in the fall when we said:
For one of the 69 reviews the GAO performed, the audit report cited eight significant deficiencies in the contractor’s accounting system but since the contractor wasn’t really cool with that, the auditors dropped five of the [significant deficiencies] and recommended that the other three be “improved without additional work”.
So this really, really, really does come as a surprise. It is good to know that the GAO — never shy on tooting its own horn — is still out there earning it’s “taxpayer watchdog” badge.
At 256 pages, this thing is a beast. We’re plowing through it to find the more interesting tidbits where we can and if you’re on cruise control today, take a gander for yourself to see your tax dollars at work.
Fiscal Year 2009 Financial Report of the United States Government [GAO.gov]
U.S. Government’s 2009 Financial Report Shows Significant Fiscal Challenges [Press Release]
GAO Cites Weak Financial Management in Federal Government [Web CPA Debits & Credits]
Quote of the Day: Are Great Liars Powerful or Are the Powerful Great Liars? | 02.26.10
“I was shocked to see how beautiful the results are. I literally can say with total accuracy that high-powered liars are so good at lying that they look like truth-tellers in every way — physically, psychologically, emotionally, etc.”
~ Dana Carney, assistant professor of management at Columbia Business School, on the results of an unpublished study that shows that people in powerful positions have a knack for fibbing.
Five Questions with Edith Orenstein of FEI Blog
Anyone out there have to comply and/or pay attention to the anything and everything that is dropped by the SEC, IASB, FASB, or PCAOB? Does the mere thought of reading anything that these bodies cause you consider drowning yourself in the nearest toilet? Us too.
That’s why we like Edith Orenstein so much. She is the Director of Accounting Policy Analysis & Communications at Financial Executives International and the author of the FEI Financial Reporting Blog. Edith has the amazing ability to take all this regulatory wonky goodness and put it into a wonderfully concise package. She saves you to the trouble of drowning in minutiae and gives you what you need to know.
Plus, she’s really nice. Think of it this way: in terms of temperament, Edith sits on one end of the accounting blogger spectrum; on the other end is the Jr. Deputy Accountant.
Why should accountants read your blog?
To learn about what FASB, the IASB, the SEC, or the PCAOB decided yesterday or today, and why it matters. And when Congress, Treasury, GAO or another agency gets into the fray, that’s always something of interest.
If someone had to read just one post of yours which one would it be?
Auditors in Love (which links to an ‘accounting music video’ which has received over 5,000 views, by the way.) No! Just kidding! It would be “Why Accounting Matters.” But, in all seriousness, some of my personal favorite posts are the ones in which I could tie in a musical theme, like Under Pressure, Unstuck From the Moment, and Say-Say-Say On Pay.
A good blogger is…
Someone who can give you really good facts on a timely basis, or really good insights, or both.
Who is your favorite blogger?
Francine McKenna of Re: The Auditors. I don’t always agree with what Francine says, and it’s not unusual for us to have opposing points of view or perspective on certain matters, but I respect what she writes given her extensive background in practice, and I enjoy reading her blog; let’s face it, she’s got that tabloid quality that makes reading about auditing fun.
The biggest issue facing accountants today is…
The volume and complexity of accounting literature (GAAP), throw in a dash of SEC, PCAOB, AICPA regulations and standards, and a pinch of COSO, (not to mention IRS rules and regs and other regs) and I have to give a lot of credit to practicing accountants and auditors who are faced with keeping current on and correctly applying all of these standards and rules. And IFRS is looming over the horizon; as someone said recently on an academic listserv I read (the AECM listserv), IFRS is significant whether or not the U.S. moves to adopt it, given that most of the rest of the world has.
Reminder: Extended Haiti Donation Deadline for 2009 Tax Returns Is This Sunday
Despite many arguments that the extension was bad legislation, it cruised through Congress and was quickly signed by the POTUS and now the window is closing fast.
For those of you that are able to itemize deductions and you’re looking for a little extra deduction for ’09, the countdown is at t-minus two days.
If you are considering a last minute donation, A) what the hell have you been waiting for? B) you’re in a bit of luck because the deadline has a little bit of wiggle room, as Kay Bell tell us, “If you charge your donations to a credit card before the end of February, that counts even if you don’t get or pay the your credit card bill until next month or later.”
For those of you that don’t trust machines and are cutting a check, you best drop it soon if you want it to hit your ’09 return, “don’t send a check dated Feb. 28 on March 15 and claim it…if a tax examiner looks at your statement and sees the check didn’t clear until the last half of March, your deduction will probably be disallowed.”
Oh and it’s cash only. Your clothes that were originally meant for your garage sale this Spring are generous but not eligible for the extension.
On a related note, part of Stephen Chipman’s blog post from this week announced that Grant Thornton had raised approximately $140,000 that will be split between the Red Cross and the Salvation Army. Thumbs up GT.
2009 Haiti donation deadline Feb. 28 [DMWT]
Quote of the Day: Harry Markopolos Had That Crazy Look in His Eye | 02.25.10
“If he contacted me and threatened me, I was going to drive down to New York and take him out. At that point it would have come down to him or me; it was as simple as that. The government would have forced me into it by failing to do its job, and failing to protect me. In that situation I felt I had no other options. I was going to kill him.”
~ Harry Markopolos, in his new book, on Bernie Madoff.
Stephen Chipman Blog Watch: Back to Hotlanta
Today in Stephen Chipman blog analysis we’re thinking that the rager that he attended in Atlanta got him jonesing for another trip down south because he made another short excursion down to GA but this time it was for some strategory:
Attending a hard-working Senior Leadership Team (SLT) meeting in this wonderful city, I took a break to check e-mail. I thought perhaps I’d had too much BOLD coffee, when I skimmed this alert to our Atlanta personnel:
Please be advised that the downtown [Atlanta] connector is currently backed up due to a zebra escaping from the Barnum & Bailey Circus. Zebra has since been captured; however, traffic is expected to remain backed up
Right then, Zebra has been captured.
Two things: 1) is Chip a caffeine junkie? and 2) that last sentence strikes us as deadpan. Do we detect some style here?
Putting wild animals and addiction aside, SC goes on to tell us about a little rendezvous he had in London for some Grant Thornton International back-slapping that he got to do with his predecessor and current GTI CEO, Ed Nusbaum. Nothing really to report other than Steve-o claims that word round the camp fire is that Ed has started sneaking out the back door again but secretly doesn’t give a damn because he’s got the big chair now and he can do whatever he wants. He’s talking like he’ll start walking out the front door, in front of everyone, because he leaves when he wants.
That’s how we read into it anyway.
It seems that while Steve has taking this blogging thing by the horns there hasn’t been much commentary on more fun topics (maybe it’s just us). For example, we’d really like to know if he joined the “Sexy Accountant” group on Facebook or what his biggest audit room pet peeves are.
We’re just saying, don’t be afraid to put it all out there.
Accounting News Roundup: SEC Delay on IFRS Irks Some; Client Opinions of Big 4 Audits Not So Hot in UK; IRS Asks for $21M to Answer More Phones | 02.25.10
• U.S. delay on global accounting leaves world waiting [Reuters]
The head of financial reporting at the ICAEW is not impressed with the SEC’s plan to string everyone along on IFRS. Although we’re sure Dr. Nigel Sleigh-Johnson is bright guy, we’re not sure what the good doctor was expecting from, you know, the SEC.
Dr. Johnson complains that ‘the world [has] been awaiting clear signals from the Securities and Exchange Commission as to how and when it is going to start the process of completing the convergence to International Financial Reporting Standards,’ which is probably true. Think about it. If 110 countries have jumped on the IFRS ship, they sure as hell would want the US of A on that ship too because that way, if this turns out to be the worst idea in the history of double-entry accounting, then at least the U.S. went along with it too.
• Big Four audits are off the pace [Accountancy Age]
As a group, the Big 4 didn’t fare to well in the inaugural “Accountancy Age Finance 360 survey of client opinions” which asked participants to give their “views on the service they received from their last audit provider”.
Out of twelve firms, PricewaterhouseCoopers ranked the highest at #5, KPMG #9, Deloitte #10, and Ernst & Young brought up the rear at #12. The Age reports that “[E&Y] Staff were described as ‘pretty dire’, short on technical knowledge, confidence and even decent written English. Negative comments outnumbered the positive two to one.” Comments on KPMG and Deloitte were a little better:
While KPMG won plaudits for technical skills, it was let down by perception of its added value, with one FD claiming “very little feedback on potential improvements” their money.
Deloitte also struggled to prove it added value, while clients felt the firm’s audits were “mechanical” and an exercise in “box-ticking”.
One FD felt Deloitte was “more concerned with gathering enough evidence to stand up in court with a defence if there were ever a negligence case”.
All the firms not happy with their ranking essentially said that they were “committed to the highest standards of work” or something like that. You know the drill.
The tops firms in the survey were all included two Global 6 candidates: Mazars at #1 and Grant Thornton at #3 with Horwath Clark Whitehill taking the silver.
• IRS Commissioner Requests Additional $21m So IRS Will Not Answer Taxpayer Phone Calls 25% of the Time [TaxProf Blog]
Doug Shulman asked the House Appropriations Subcommittee on Financial Services and General Government for $21 million to improve the customer service. Apparently this would result in a 4% jump in calls answered. That sounds like magical government math if we have ever heard it.
Ohio Man Fighting the IRS May Not Be Done Bulldozing
Great news everyone! There’s a chance that more bulldozer fun will be had in Ohio, courtesy of Terry “Dozer” Hoskins.
Having demolished his house in less than two hours and knowing that it was only a matter of time before the bank came after his business property, he’s giving serious thought to renting another dozer and finishing this thing once and for all. Small town bank and IRS be damned.
Hey, we’re all for it. If you can a dozer for $500 why not introduce a little more chaos in your life? And don’t worry, the man is a professional and is always mindful of safety, “‘You have to know what you’re doing before doing something like this’ to avoid being hurt, Hoskins said of destroying his house. ‘I’ve run heavy equipment for years.'”
Believe it or not, Dozer’s wife wasn’t thrilled with the whole razing of the house, “Also not happy about the destruction of their house was his wife, Hoskins said. They are now living in one of the buildings on the commercial property.” He must have concluded that since he had already declared bankruptcy and destroyed one piece of property, floating the idea of flattening the business property couldn’t piss off the Mrs. too much more.
Question Hoskins decision-making skills if you like but it’s good to see a man taking pride in his work, “I don’t regret one bit of it.”
Home razer might take business next [Cincinnati Enquirer via TaxProf]
Bad News: Forensic Accountants Are Crooks Too
Allegedly of course! Despite our best wishes for a forensic accountants to be fraud-busting crusaders that pursue truth, justice and all that crap, this corner of the profession is not immune from shiesty characters.
Lewis Freeman, “Miami’s go-to forensic accountant”, has been charged with embezzling $2.6 million from his clients. The Miami Herald is reporting that Lew has pleaded not guilty but is planning to change his plea to guilty “within a few weeks” while his attorneys try to negotiate a lighter sentence. The Herald also reports that two other employees of his firm, including the CFO, will be charged as co-conspirators in the case.
When you think about it, this really exposes Freeman as not being a very smart guy, just smarter than the people he was ripping off. As criminal mastermind Sam Antar told us in an email, “Lewis Freeman may have been considered ‘Miami’s go-to forensic accountant’ but he was not a very bright guy. He simply took old money from his client’s trust accounts and replenished it with new money. As a forensic accountant, he should have known that ultimately such Ponzi schemes end up collapsing over time.”
Despite this, Freeman was able to carry on the scheme for approximately a decade, swindling up to 250 victims.
Wondering what this latest development meant in terms of fraud involving forensic accountants, Sam told us, “Forensic accountants turned white collar criminals present a real challenge for law enforcement, since they (excluding Lewis Freeman) are far more sophisticated in their knowledge of anti-fraud measures and are more innovative in exploiting weaknesses in internal controls than the common white collar criminal.”
And don’t worry, they’re out there, “Freeman is probably not the only forensic accountant turned Ponzi schemer out there. The smarter and more sophisticated one’s have not been caught yet,” Sam said. Got it. Suspect everyone.
We first mentioned Lewis Freeman last fall when his firm was under investigation by the FBI and that his firm briefly served as the Chief Restructuring Officer for the Palm Beach Funds that were part of the Tom Petters orgy of fraud.
The bright side is we can’t foresee any scenario where the image of accountants gets worse.
Miami’s ‘go-to’ forensic accountant pleads not guilty to fraud [Miami Herald]
Even More Tax-Related Violence: Wife Shoots at Refund Hogging Husband
As we still tread in the wake of the Joe Stack attack on the IRS, it seems that bizarro things are happening all over this great land of ours and many of them have to do with taxes and/or the IRS. Jailbirds requesting fraudulent refunds and receiving them, IRS-inspired bulldozing of houses and now we’ve learned about a woman who tried to kill her husband who wouldn’t share their tax refund money.
And like Joe, Bulldozer Terry and the Florida inmates, the woman is pretty satisfied with her actions:
Investigators say the woman then went into the city of St. Louis and threw the gun in a sewer. Police contacted the woman a short time later and she turned herself in. Police say she didn’t seem sorry.
“She felt more than justified. She cooperated very well, with the reasoning why she fired the shots, as well as recovering the gun. She said she didn’t want a child to find the gun in the sewer,” says Daniel O’Conner, the Assistant Chief of Police for Pine Lawn.
This lady can’t be all bad; she was thinking about the kids when she threw that gun in the river. There’s no indication that the husband in this little caper was just a greedy SOB or if his not-so-good sharing skills were justified due to a spendy Mrs.
Regardless, it’s seems that every hour brings another story that strengthens the argument that taxes are the cause of all the strife and violence in this country. We should have taken the IRS shotgun shopping spree as a sign.
[h/t TaxProf and Tax Update]
Quote of the Day: Hero Qualifications Are Slipping | 02.22.10
“Yes. Because now maybe people will listen.”
~ Samantha Bell, daughter of Joseph Stack when asked if she thought her father was a hero.
David Paterson Not Unpopular Enough, Considers Refund Delay
Okay, so New York is in a dire fiscal situation and David Paterson is pulling out all the stops. Last week, he started kicking the idea around of temporarily freezing New York State tax refunds for individuals and businesses until a state budget is in place.
Naturally, the Governor is putting this on the New York State legislature saying that if they do not ‘act, and close this deficit with real and recurring deficit reductions, not made-up, phony revenue enhancers that don’t really exist’ then the state could go bankrupt. Don’t blame him, New Yorkers! He’s trying to fix this damn mess.
According to a report from WRVO, the state would freeze $500 million in taxpayer refunds and $200 million in business refunds to April 1st. Are people really getting their tax returns filed that quickly? Is there some kind of recessionary trend that shows that tax returns are filed more quickly during bad economies? Nothing is official yet so don’t worry but sounds like they’re running out of ideas up there.
Regardless of the suggestion, Paterson’s critics are not down for this, as Assembly Minority leader Brian Kolb called the withholding tax refunds “an absurd and crazy idea.”
Since “absurd and crazy” seems to be par for the course in Albany, we can’t really say that this is the worst idea David Paterson has ever had. He’s talking to Eliot Spitzer again, isn’t he?
Gov. Paterson Comments on Withholding Tax Refunds [WRVO via Web CPA]
Crowe Horwath Files Creditor Claim Against Michael Jackson Estate
How’s this for weird: accounting firm Crowe Horwath has filed a creditor claim against the estate of Michael Jackson, claiming that they handled his “business affairs until the day he died,” according to TMZ.
The claim is for about three weeks of work, from June 4, 2009 to June 29th (DOD) and the total bill reported is $38,495.
Since this was the weirdest thing we’ve read in the past hour, we called up Crowe to find out their side since TMZ didn’t seem to bother. They’re currently checking into it and will hopefully get back to us. Stay tuned…
Sarbanes-Oxley’s Latest Unintended Consequence: Even Worse Postal Service
I never believed Sarbanes-Oxley could even be blamed for shrinking media distribution but the impossible has happened and CPA Trendlines shares the Compliance Week article that enlightens us on this latest unintended SOX consequence:
The Clovis News Journal—paper of record for Clovis, population 37,200—says that it cand no longer deliver newspapers to its subscribers. The reason? Sarbanes-Oxley.
“Due to the federal Sarbanes-Oxley Act and its required implementation locally by the U.S. Postal Service, the Portales and Clovis post offices no longer can provide same-day mailed service of the Portales News-Tribune and the Clovis News Journal,” according to the News Journal website.
News Journal’s circulation director tells Compliance Week that the issue could be due to a “misinterpretation” of SOX rules by the local Post Office, who swears it is simply complying with the Postal Accountability and Enhancement Act of 2006.
Section 404 strikes again!
It appears as though the USPS also misinterpreted pension accounting rules, leading to it overpaying some $75 billion to the Postal Service’s Civil Service Retirement System pension (so says the USPS Inspector General). What the hell is going on over there? Is that SOX’s fault too? I love blaming Sarbanes-Oxley for stuff too but let’s be reasonable here, these guys are a mess.
By March 2010, the USPS will be “locking down” its tech systems for six months as it struggles to comply with only the worst bits of SOX for the sake of, uh, efficiency? Intelligent Mail has already proven to be a burden in a climate where more of us email than use stamps, online bill pay is the norm and publicly-traded bad boys like UPS and FedEx dominate market share. They already know their way around SOX and have the capital to handle it if they need a few compliance artists around. The USPS? Not so lucky.
Perhaps the local Post Office is confused and Clovis News Journal’s 410 print delivery subscribers will get their papers at last. If not, is it really appropriate to blame SOX? Sure, why not, if not this I’m sure we can find something else to peg to it if the need arises.
Making mailers sign off like auditors on a piece of mail? Oh now that’s tedious. Yay SOX!
Quote of the Day: Somewhere Phil Mickelson Is Doing a Fist Pump | 02.19.10
“I do plan to return to golf one day, I just don’t know when that day will be.”
~ Tiger Woods
Just So You’re Aware: There’s a Facebook Group “Sexy Accountants”
From the group description:
“Basically, we’re Accountants aaaaaand very sexy. Aint no pocket protectors here, we’re all about Montblancs and Prada. All sexy accountant impersonators will be removed.”
Lame? Perhaps. Surprising? Hardly, dude.
What’s even less surprising is that Joseph Stack has waaaaay more members/fans in his FB groups.
Five Questions with the Jr. Deputy Accountant
You’re probably not aware of this but the Jr. Deputy Accountant (aka Adrienne Gonzalez) has been working outside her normal confines of the Bay Area this week in an undisclosed location.
While her current location is a mystery, what’s not up for debate is her ability to opine (frequently with too many words) on all things Federal Reserve, church accounting or the CPA Exam.
Besides her daily chores at GC, JDA has been published at a plethora of other blogs including Goldman Sachs 666 and BankFailFriday
.
Why do you blog?
For the same reason people play Grand Theft Auto; it helps to have a productive outlet for my frustration with our regulatory and banking system. That and I’m an attention whore.
What are your three must-read accounting blogs and one must-read non-accounting blog?
I love Krupo.ca, Skeptical CPA, and The Summa. For non-accounting, I’d have to say either Lew Rockwell or Daily Reckoning for my daily dose of doom and gloom. I’m obviously a miserable bastard.
If someone had to read just one post of yours which one would it be?
I’m partial to my recent “Fed Year in Review” but with almost 2000 posts, how the hell am I supposed to pick favorites? “You Want to Audit the Fed But Why?” is also a favorite of mine.
Accountants are…
Awesome because they pay my bills.
The biggest issue facing accountants today is…
Globalization. It’s the vampire lurking outside of accounting’s window whispering “let me in” and too few accountants are focused on the impact. IFRS adoption in the United States is a perfect example of what happens when we bow to global expectations in financial reporting and accounting. I of course don’t believe we need to bow to anyone.
Arguments Heard in BDO Appeal of $521 Million Verdict
Oral arguments for BDO’s appeal of the verdict in the Banco Espirito fraud case were this past Tuesday, the 16th, in front of the Florida 3rd District Court of Appeal in Miami.
If you’re not familiar with this case, we’ll catch you up: Banco Espirito Santo International Ltd., Banco Espirito Santo S.A., and ESB Finance all invested in E.S. Bankest L.C. BDO served as the auditor of Bankest. Crazy massive fraud (bogus accounts receivable) was going on at Bankest that was discovered by Banco Esprito. Bankest went bankrupt, their executives went to jail, Banco Espirito lost millions.
Banco sued BDO in 2004 and in 2007 a jury found the Firm liable for malpractice and gross negligence. Prior to the jury’s decision, BDO CEO Jack Weisbaum testified that the firm would not be able to pay punitive damages. The jury didn’t care and awarded Banco $170 million in compensatory damages and $351.7 million in punitive damages for a grand total of $521.7 million, the same amount of accounts receivable that BDO “audited”. Now here were are, it’s 2010, appeals process. Whew. Follow?
We spoke with Steven Thomas, who has represented Banco Espirito Santo throughout this case, earlier this week and he filled us in on many details. BDO is appealing the verdict arguing that the case should not have been bifurcated (i.e. divided into two) at trial. In other words, it sounds as though BDO has resorted to arguing technical legal points in this appeal as opposed to defending against the finding that they both performed malpractice and were grossly negligent.
As we explained above, the malpractice and gross negligence arose out of BDO’s failure to discover the fraudulent accounts receivable at Bankest. At trial, Mr. Thomas told us that under cross-examination, the BDO engagement partner admitted that it was the auditors’ job to find fraud and then subsequently contradicted himself when being questioned by his own counsel, saying it wasn’t their job.
Regardless of what side you fall on in the whole auditors’ responsibility to discover fraud argument, Mr. Thomas told us this, “I have a litigated a lot of cases on this issue and we never, ever, ever lose.”
We reached out to BDO and Greenberg Traurig the law firm representing BDO for comment. Neither firm has gotten back to us.
BDO has indicated that it will appeal this case to the Florida Supreme Court if necessary and since BDO International was found to be not liable, the entire judgment falls to the U.S. firm. BDO had $620 million in revenues in its most recent fiscal year and currently has around 3,000 employees. And despite the fact that this case will not be resolved for some time, if BDO ultimately compelled to pay the damages it could have a devastating impact on the firm.
The Full Text of Joseph Stack’s Manifesto: Details His Struggles With IRS
It would be very easy to use words like “insane” and “rambling” to describe the manifesto/suicide note left by alleged the alleged pilot of the plane that crashed in Austin today. The actions taken by him were undoubtedly insane and the note he left today shows that he was sick of struggling.
The long/short of it is that Joseph Stack was an engineer who was grappling with the IRS over his status as independent contract as denied employee status and was thus subject to taxes on income that he had not previously remitted to the IRS.
When an engineer (or any other consultant for that matter) goes independent they’re not “employees” thus they don’t have tax withheld from their pay (ordinarily via a W-2) and companies/clients report the payment to the IRS via 1099 (often time with nothing withheld). If engineers not careful and report a lot of income and no tax withheld the IRS will come back and say “where the hell is ours?”
The other situation is if they work almost exclusively for one “client” the IRS might say, “you’re really an employee because you don’t have income from other companies.” The Company then gets in trouble because they should be remitting payroll taxes (Social Security/Medicare) and the employee could get in trouble if they aren’t making estimated tax payments.
Engineers often have to face the facts as to whether or not they are truly an independent contractors or not and Stack seems to have struggled with this for many years. The amendment to the tax in 1986 was what haunted him, “The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.”
Obviously, this was very personal for him.
Without all the facts surrounding his professional situation, it’s impossible to know if Stack’s frustrations were legitimate but his note has brought out the extreme political factions Headlines like this: “Austin Plane Crash Labeled ‘Right-Wing Domestic Terror Attack’ By Obama Supporters” are popping up already and message boards are filling up with comments like:
“YOU need to take an ounce of responsibility. All you repubbers[sic] are complaining about Bush but still putting all the blame for Bush’s errors on Obama or “The Government”. This plane guy decided to attack the Government. Pilot-guy sounds like a thousand posts I have read on thee[sic] boards.”
“There is no point in ‘dialogue’ with you right wingers, you guys are the taliban of america.”
Hell, there’s already a Facebook fan page set up touting the “The philosophy of Joe Stack” which if you read one of his last sentences, shows just how fed up and desperate he had become, “Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer”
If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn’t enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. I find the process of writing it frustrating, tedious, and probably pointless… especially given my gross inability to gracefully articulate my thoughts in light of the storm raging in my head. Exactly what is therapeutic about that I’m not sure, but desperate times call for desperate measures.
We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principal is promptly labeled a “crackpot”, traitor and worse.
While very few working people would say they haven’t had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.
Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.
And justice? You’ve got to be kidding!
How can any rational individual explain that white elephant conundrum in the middle of our tax system and, indeed, our entire legal system? Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly “holds accountable” its victims, claiming that they’re responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that’s not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is.
How did I get here?
My introduction to the real American nightmare starts back in the early ‘80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code’ readings and discussions. In particular, zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy. We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren’t steeling from our congregation or lying to the government about our massive profits in the name of God). We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.
The intent of this exercise and our efforts was to bring about a much-needed re-evaluation of the laws that allow the monsters of organized religion to make such a mockery of people who earn an honest living. However, this is where I learned that there are two “interpretations” for every law; one for the very rich, and one for the rest of us… Oh, and the monsters are the very ones making and enforcing the laws; the inquisition is still alive and well today in this country.
That little lesson in patriotism cost me $40,000+, 10 years of my life, and set my retirement plans back to 0. It made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie. It also made me realize, not only how naive I had been, but also the incredible stupidity of the American public; that they buy, hook, line, and sinker, the crap about their “freedom”… and that they continue to do so with eyes closed in the face of overwhelming evidence and all that keeps happening in front of them.
Before even having to make a shaky recovery from the sting of the first lesson on what justice really means in this country (around 1984 after making my way through engineering school and still another five years of “paying my dues”), I felt I finally had to take a chance of launching my dream of becoming an independent engineer.
On the subjects of engineers and dreams of independence, I should digress somewhat to say that I’m sure that I inherited the fascination for creative problem solving from my father. I realized this at a very young age.
The significance of independence, however, came much later during my early years of college; at the age of 18 or 19 when I was living on my own as student in an apartment in Harrisburg, Pennsylvania. My neighbor was an elderly retired woman (80+ seemed ancient to me at that age) who was the widowed wife of a retired steel worker. Her husband had worked all his life in the steel mills of central Pennsylvania with promises from big business and the union that, for his 30 years of service, he would have a pension and medical care to look forward to in his retirement. Instead he was one of the thousands who got nothing because the incompetent mill management and corrupt union (not to mention the government) raided their pension funds and stole their retirement. All she had was social security to live on.
In retrospect, the situation was laughable because here I was living on peanut butter and bread (or Ritz crackers when I could afford to splurge) for months at a time. When I got to know this poor figure and heard her story I felt worse for her plight than for my own (I, after all, I thought I had everything to in front of me). I was genuinely appalled at one point, as we exchanged stories and commiserated with each other over our situations, when she in her grandmotherly fashion tried to convince me that I would be “healthier” eating cat food (like her) rather than trying to get all my substance from peanut butter and bread. I couldn’t quite go there, but the impression was made. I decided that I didn’t trust big business to take care of me, and that I would take responsibility for my own future and myself.
Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.
For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).
SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.
(a) IN GENERAL – Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:
(d) EXCEPTION. – This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.
(b) EFFECTIVE DATE. – The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.
Note:
• “another person” is the client in the traditional job-shop relationship.
• “taxpayer” is the recruiter, broker, agency, or job shop.
• “individual”, “employee”, or “worker” is you.Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.
During 1987, I spent close to $5000 of my ‘pocket change’, and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”. Oh, and don’t forget, for all of the time I was spending on this, I was loosing income that I couldn’t bill clients.
After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren’t going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect.
Again, rewind my retirement plans back to 0 and shift them into idle. If I had any sense, I clearly should have left abandoned engineering and never looked back.
Instead I got busy working 100-hour workweeks. Then came the L.A. depression of the early 1990s. Our leaders decided that they didn’t need the all of those extra Air Force bases they had in Southern California, so they were closed; just like that. The result was economic devastation in the region that rivaled the widely publicized Texas S&L fiasco. However, because the government caused it, no one gave a shit about all of the young families who lost their homes or street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to “shore up” their windfall. Again, I lost my retirement.
Years later, after weathering a divorce and the constant struggle trying to build some momentum with my business, I find myself once again beginning to finally pick up some speed. Then came the .COM bust and the 911 nightmare. Our leaders decided that all aircraft were grounded for what seemed like an eternity; and long after that, ‘special’ facilities like San Francisco were on security alert for months. This made access to my customers prohibitively expensive. Ironically, after what they had done the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY! After these events, there went my business but not quite yet all of my retirement and savings.
By this time, I’m thinking that it might be good for a change. Bye to California, I’ll try Austin for a while. So I moved, only to find out that this is a place with a highly inflated sense of self-importance and where damn little real engineering work is done. I’ve never experienced such a hard time finding work. The rates are 1/3 of what I was earning before the crash, because pay rates here are fixed by the three or four large companies in the area who are in collusion to drive down prices and wages… and this happens because the justice department is all on the take and doesn’t give a fuck about serving anyone or anything but themselves and their rich buddies.
To survive, I was forced to cannibalize my savings and retirement, the last of which was a small IRA. This came in a year with mammoth expenses and not a single dollar of income. I filed no return that year thinking that because I didn’t have any income there was no need. The sleazy government decided that they disagreed. But they didn’t notify me in time for me to launch a legal objection so when I attempted to get a protest filed with the court I was told I was no longer entitled to due process because the time to file ran out. Bend over for another $10,000 helping of justice.
So now we come to the present. After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.
When we received the forms back I was very optimistic that they were in order. I had taken all of the years information to Bill Ross, and he came back with results very similar to what I was expecting. Except that he had neglected to include the contents of Sheryl’s unreported income; $12,700 worth of it. To make matters worse, Ross knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me.
This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented). Things I never knew anything about and things my wife had no clue would ever matter to anyone. The end result is… well, just look around.
I remember reading about the stock market crash before the “great” depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s “business-as-usual”. Now when the wealthy fuck up, the poor get to die for the mistakes… isn’t that a clever, tidy solution.
As government agencies go, the FAA is often justifiably referred to as a tombstone agency, though they are hardly alone. The recent presidential puppet GW Bush and his cronies in their eight years certainly reinforced for all of us that this criticism rings equally true for all of the government. Nothing changes unless there is a body count (unless it is in the interest of the wealthy sows at the government trough). In a government full of hypocrites from top to bottom, life is as cheap as their lies and their self-serving laws.
I know I’m hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn’t limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at “big brother” while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won’t continue; I have just had enough.
I can only hope that the numbers quickly get too big to be white washed and ignored that the American zombies wake up and revolt; it will take nothing less. I would only hope that by striking a nerve that stimulates the inevitable double standard, knee-jerk government reaction that results in more stupid draconian restrictions people wake up and begin to see the pompous political thugs and their mindless minions for what they are. Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer. The cruel joke is that the really big chunks of shit at the top have known this all along and have been laughing, at and using this awareness against, fools like me all along.
I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.
The communist creed: From each according to his ability, to each according to his need.
The capitalist creed: From each according to his gullibility, to each according to his greed.
Joe Stack (1956-2010)
02/18/2010
Another Top Ten Diversity Ranking for the Big 4; This Time for a Price
Diversity Inc. ran a post this week highlighting Ernst & Young’s recruiting efforts with regards to increasing its diversity numbers. Specifically touching on EY’s Discover Tax Program, the essence behind Diversity’s article revolved around how EY (like its competitors) have established programs in place to both actively recruit Black and Latino students as well as break the stigma oftentimes placed on accountants by the media and society (i.e. nerdy white guys). What it ignored was the money these programs are costing firms.
It’s no secret that the Big 4 are out to recruit the best and brightest. Caleb has hit home the fact that the same firms are ranking whores as well. But why do the firms have separate programs aimed directly at minority-represented societal cross sections?
Because the numbers are abysmal.
Latino in America cut through recent U.S. Census data to realize that, although roughly one in three Americans is a minority, only 8% of the CPA profession is represented by minorities:
• 4% Asian/Pacific Islander
• 3% Latino
• 1% African American
Increasing diversity from the campus level is an uphill battle. Internal programs and recruitment efforts can can only reach so far (and they’re expensive). For the sake of not sacrificing quality workmanship, the reality is there are simply not enough minority accounting students in the market. Supply and demand, people.
In steps INROADS.
INROADS is, for all intents and purposes, a global internship placement company for minority students. Companies pay a premium for an opportunity to hire the candidates that the INROADS organization hand selects. Their website states the following:
There are three keys to success for INROADS students: Selection, Education & Training, and Performance. For over three decades, INROADS has helped businesses gain greater access to diverse talent through continuous leadership development of outstanding ethnically diverse students and placement of those students in internships at many of North America’s top corporations, firms and organizations.
A quick glance at their top ten client listing and four very familiar names will jump out to you. According to the website, the Big 4 are the current employers of more than 375 INROADS interns. These are not staggering numbers by any means, but it is clear that the firms are in fact shelling out money to make the workplace more diverse.
You might even be asking yourself, “What’s a few thousand dollars to recruit two additional minority students to my office?” Well, after an increase in an office’s diversity percentage, it most likely results in someone’s personal payday come performance review season. Oh, and the firm looks great on paper.
(UPDATE 2) Alleged Suicide Pilot Blames IRS in Manifesto
~ The manifesto has been pulled from embeddedart.com. You can see the note in its entirety at the Smoking Gun.
~ UPDATE, 5:11 pm: Statement from the IRS
By now you’ve probably heard about the plane crashing into a building in Austin, Texas that housed around 200 IRS employees. So far reports are that the IRS is still trying to account for all the employees (see statement below). We left a message with the IRS that hasn’t been returned yet.
Everything is “preliminary” of course but apparently the alleged pilot, Joseph Stack s fire, stole the plane and flew it into the building:
Stack was upset about the Tax Reform Act of 1986. So much so, he wrote a 3,200 word suicide note. that can be read in its entirety at embeddedart.com.
Here’s an excerpt:
Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.
For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.
(a) IN GENERAL – Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:
(d) EXCEPTION. – This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.
(b) EFFECTIVE DATE. – The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.
Note:
• “another person” is the client in the traditional job-shop relationship.• “taxpayer” is the recruiter, broker, agency, or job shop.
• “individual”, “employee”, or “worker” is you.
Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.
The note goes on to rail against CPAs:
After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.
It appears that Stack was being audited by the IRS and that things had take a turn for the worse, “To make matters worse, [my accountant] knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me. This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented).”
His ominous sign off leaves little doubt about his own demise, “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”
IRS Statement:
We can confirm that a small plane hit a building in Austin, Texas that includes IRS offices. This is the Echelon 1 Building, which houses about 190 IRS employees. We are still in the process of accounting for all of our employees. We will be providing updates as more information becomes available.
Job of the Day: A Houston Power & Gas Provider Needs You for a CFO Support Role
Michael Page Executive Search has a a premier power & gas provider client with physical & wholesale trading operations globally. They participate in commodities markets worldwide. They are seeking a strong middle office individual with expertise in energy.
The position requires a minimum of 10 years experience and would serve as lead support to the CFO.
Get more details after the jump.
Recruiter: Michael Page Executive Search
Title: Lead Financial Officer
Location: Houston, TX
Minimum experience: 10 years
Responsibilities: Serving as the lead support to the CFO of the business, other responsibilites include: Analyze, explain, and validate daily and monthly p&l; responsible for oversight and maintenance of daily p&l reporting and month end close; Manage ad hoc requests from front office, risk, finance teams; Responsible for balance sheet review and control; Manage new business products approval process and reviews on complex products; Support new product roll-out; Supervise team of analysts supporting energy trading desks
Qualifications: Specialized degree in accounting/finance; minimum 10 years of relevant experience; previous experience in middle office trading P&L preparation/analysis or product control positions specifically within energy sector.
See the entire description over at the GC Career Center and visit the main page for all your job search needs.
The IRS’ Most Important Step Ever Has Been to Require Preparer Registration
That’s one man’s opinion anyway! The IRS Oversight Board put out its annual Taxpayer Attitude Survey and while the survey indicates that most people are down with some regulation around preparers, the Oversight Board’s Chairma Paul Cherecwich sees it as being far bigger than that:
“Requiring tax preparers to register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes,” said IRS Oversight Board Chairman Paul Cherecwich in a statement. “A tax return prepared improperly or fraudulently can have negative ramifications for years for an unsuspecting taxpayer — and it’s clear from the board’s survey that Americans know that.”
Now maybe we’re overstating this a little bit but to say that forcing tax preparers to “register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes” is um, well, ludicrous. Say it’s an important step, say it’s a good step, whatever but one of the most important things the IRS has done in our f—ing lifetime? Creating additional layers of bureaucracy is not an accomplishment.
Breathe…Since we’re directly affected by this, we thought we should get a practitioner’s point of view. We dialed up our contributor Joe Kristan who is in the throes of tax season for his opinion:
All “issue” polls like that are useless because they never include costs. For example, they never follow up: “would you still support it if it drove 20% of the preparers out of the market and raised your costs by 20%?” They assume that there is no hitch between the regulators cup and your lip, and that all regulators work well. As if.
The regulations will increase costs and do little or nothing to improve tax compliance. Only a better tax law can really do that.
That’s our emphasis but Joe would probably agree with it.
Busy Season Interns: Don’t Waste Their Time
Continuing with the busy season theme, let’s touch on everyone’s favorite coffee jockeys, the interns. This isn’t prime season for interns at accounting firms but we know there are a few lucky (?) teams out there that have an extra set of hands on deck.
Getting serious for two, this time of year, everyone is under pressure to get things done and if you happen to have an intern on your team, they either make your job infinitely easier or they are the bane of your existence. If you fall into the latter category, why is this the case?
It’s pretty easy for you to conclude that the blade of grass tapping you on the shoulder every ten minutes is the person at fault but a lot of times, interns get thrown into bad situations where they end up working for seniors or managers that are so swamped (or helpless) that they can only think about their own workload while there’s a 21 year old that needs something to do (besides looking through menus and making copies).
Since accounting firms put so much effort into recruiting the next wave you’d think that this enthusiasm would spread to teams like the Plague. Unfortch, there are many that see interns as an annoyance during this time of year because, “I have so much work to do and I don’t have time to handhold interns” and we think that’s bullshit.
We’re not saying that there aren’t bad interns out there. And we’re not saying you’re not busy. We know better. But if you gave that intern something meaningful to do instead of whining about how busy you are, they might make your life a speck (or a few) easier.
And interns need hand holding because they’re interns. Don’t forget that up until this point, they’ve been wearing sweats 24/7 and that you used to be just like them. Experienced team members should take this time to utilize them in a meaningful way and not as gofers. If you’re one of those teams that needs a gofer, at least squeeze some meaningful work somewhere so they can learn something and they probably won’t mind the gofering as much.
Yeah, it might take some effort on your part but it’s definitely worth your time to mentor these future associates. If you give them some challenging work now and show them a little bit of appreciation for their efforts, they’ll run through walls for you later.
Grant Thornton’s Valentine to Employees Did Not Consist of Heart Candy
It’s the middle of February and many of you are somewhere between completely exhausted and death warmed up. This is not lost on blogger extraordinaire Steve Chipman. SC’s weekly info session has been crucial to your survival (even though it’s not meant for all of you). Knowing that his soothing words will only get you so far, he’s taken a different approach this week.
Since it was St. Val’s on Sunday, Chip figured he would mark the day for lovers by boosting your spirits by using the words of GTers less CEO-y than himself.
Today I’d like to offer some inspiration to help us push through busy season. The last year and a half have required so much more from everyone that it’s hard to imagine we can work even harder, but it’s evident that we are everywhere I look.
So what keeps us going? That’s what I was looking for when I reviewed the “I am Grant Thornton” interviews we conducted last fall. We asked a variety of people in different roles, in different offices and at different levels if they felt they made a difference, and, if so, how.
It is hard to imagine that you can work harder, isn’t it? Your spreadsheets are bleeding through your monitors, you’ve ingested far more MSG than is recommended, and your cube farm neighbor (who ordinarily smells funny) is looking hot .
And we weren’t aware of this “I am G to the T” exercise but it sounds stupendous. Who knew your personal experiences would be used at this most crucial time of year? Bet you would have really put some thought into if if you had known your words could possibly have been immortalized on Steve-o’s blog.
Here are some carefully selected examples from SC’s list and our thoughts on each:
“When a client calls me and says, “Can I pick your brain?” it’s so great because (1) they recognize I have a brain” – We agree that it’s nice when your client recognizes that you are of the same species.
“I had a client tell me recently, and I’m quoting, ‘We hire Grant Thornton because you get [stuff] done.’” – That’s Stephen’s edit. This is a family blog, people.
“I make a difference every day because I work here.” – And because my mother said so.
“Every day is a great achievement.” – We agree. Crawling out of bed is tough.
“How do I make a difference? . . . You know, I’m happy.” – God, you’re one of those happy people.
“I’ve worked at the big firms. We are not bigger by any means, but it’s a question of caliber. I knew it from my first day on the job here. We’re just a different caliber of firm.” – We’re not size queens at GT.
Steve-o’s send-off has us begging for more and also causes us to wonder A) who is this homecoming queen? and B) is Chip a Bass or a Tenor?
I’m also proud to say that among our great people are a former homecoming queen and a professional make-up artist. Of equal wonder, one of you found the most surprising thing about coming to Grant Thornton was “that all the partners have great singing voices.”
There’s more where that came from, but this is the firm’s Valentine to you.
Thanks for you!
Stephen
You could do back-to-back busy season now, couldn’t you?
Breaking: Professor Explains Tax Theory, Accused of Being a Communist
Our favorite TaxProf that we never had was quoted in a Wall St. Journal explaining how not only the winnings of Olympic athletes are taxable but also how the fair value of their medals could theoretically be taxable.
Someone read this and took immediate action:
Whether or not TaxProf Caron has a picture of V.I. Lenin in his office is not known but based on where he stands in comparison to our contributor Joe Kristan, we’d say the writer of the letter is misguided. Or Glenn Beck.
Koss Investors Lining Up for Litigation; Will Grant Thornton Join the Party?
Investors in Koss Corporation are lining up in the pending litigation against the company and a press release from law firm Carney Williams, announced this morning that those interested in as lead plaintiff have until March 12th to make their desires known.
Form the press release, “The Company and certain key executives are alleged to have violated federal securities laws by issuing false financial statements and failing to maintain adequate internal and financial controls.”
Many, like Tracy Coenen, have argued that the internal controls are management’s responsibility and Grant Thornton was not engaged to audit these controls but does that mean that GT will dodge these investor lawsuits?
We spoke with Randy Pulliam, a partner at Carney Williams on the case if he expected Grant Thornton to be named in the litigation, “the lead plaintff will ultimately decide as to who will be named in the litigation, including the accountants.”
There’s nearly a month until the deadline so it’s far too early to tell who will decide whether Grant Thornton needs to be included but we’ll go on record saying that we’d be shocked(!) if GT manages to get forgotten in this whole matter. Regardless of your feelings on the firm’s responsibility (i.e. GT should have discovered the fraud or not) the fact that Sue Sachdeva is accused of embezzling $31 million over a period of five years while Grant Thornton was auditing Koss will not be lost on the investors or their attorneys.
“This is a five year class period so many investors are eligible to participate,” Mr. Pulliam told us. Plenty of investors out there would like to see someone make things right. Grant Thornton seems like a decent candidate especially since their pockets are far deeper than Koss’. So if you asked us to put a wild-ass guess on the odds of Grant Thornton being named in the lawsuit, we’d put it somewhere in the nabe of 10-1. Not Mine that Bird territory but not Secretariat either.
We left a message at Koss and dropped an email to Grant Thornton seeking comment and neither have gotten back to us at this time. We’ll continue to update you on the developments, shopping addictions and otherwise.
Accounting News Roundup: Is the IASB Giving Up on the FASB?; Wake Forest Grads Crush the CPA Exam; NFL Looking at Rams Buyer’s BDO Tax Shelter Connection | 02.16.10
• IASB softens stance on convergence [FT]
We’re not jumping to any conclusions but yesterday the IASB made the statement that it “would no longer pursue convergence with its US peer as ‘an objective in itself'”. Now we’re not entirely sure what “an objective in itself” means but it kinda, sorta sounds like “to hell with you FASB, we’ve got our own plans.”
This revelation was part of “constitution review” in order for the IASB “to justify its public accountability” to its critics. In this review the IASB seemed to be changing its tone on just what convergence is:
In a review of its constitution published on Monday the IASB’s oversight board addressed this concern over the convergence project and said it would “emphasise that convergence is a strategy aimed at promoting and facilitating the adoption of IFRS, but it is not an objective by itself”.
So just spreading the good word about IFRS without any stated objective? Does that sound about right? It sounds a little like financial reporting evangelism.
• Wake graduates get highest passing rates on CPA exam [Winston Salem-Journal]
This is in no way presented to make you feel bad about yourself. Here are the 2008 (the most recent data available) passing rates at WF: 93% on FAR; 87.5% on Audit; 83.22% on regulation; 93.7% on BEC. The overall passing rate was 89.7%. The University has had the highest scores five years running.
If you need to go cry in the bathroom, you may do so now.
• Rams buyer’s $85 million battle with IRS [Chicago Tribune]
Shahid Khan announced last week that he was buying 60% of the St. Louis Rams. Great news right? Ordinarily, yes but now the NFL is looking into his association with a BDO tax partner that was convicted of helping clients avoid taxes through shelters.
The IRS said in court papers that the Khans hired the Chicago-based BDO Seidman accounting firm and met with tax partner Robert Greisman. The Khans engaged in at least five questionable tax shelters, with names like Son-of-Boss and Dad, and paid BDO $8.5 million in fees, about 10 percent of the alleged tax savings, according to court documents.
Yet when the revenue agency questioned Khan about his returns, he was unable to identify what services BDO provided, an IRS agent said in court documents. In April 2007, the IRS made formal requests for information to Greisman and one of his partners in Michigan in connection with its investigation of the Khans.
Greisman pleaded guilty last July to conspiracy charges related to the creation of the shelters and BDO is currently being sued by Khan for negligence and malpractice. The NFL may have saved them themselves the trouble by letting Rush Limbaugh own part of the team…
Stephen Chipman Is Slightly Annoyed by the Non-Grant Thornton People Reading His Blog
We didn’t get the third installment of Stephen Chipman’s blog until late last week and apparently while the Grant Thornton CEO seems to be keeping up his promise to come at you once a week, he’s going to be a bit more reserved going forward.
Last week SC shared a few insights from his readers, however we warned that he wouldn’t be sharing the most intimate details (e.g. ragers in Atlanta):
“Because large portions of my blog are finding their way to external Web sites, I will answer some sensitive or strategic questions via internal e-mail and send my responses directly to the person who posed them.”
Well, shucks. We’re not sure what “external websites” SC is referring to but as far as our humble posts are concerned, we merely provide snapshots that certainly don’t qualify as “large portions”. If you guys are aware of someone reposting the posts in full, get in touch with us and we’ll let them know at GTHQ.
We’re also curious as to what will qualify as “sensitive or strategic questions”. Is SC getting prodded with nosy questions about Sue Sachdeva? If so, he could at least give us a diagnosis on her supposed shopaholic tendencies. That doesn’t seem too sensitive. It’s most certainly not strategic.
We’d also like to hear his thoughts on Grant Thornton being vindicated in the Overstock.com circus. Patrick Bryne said some pretty nasty things about Steve’s beloved firm. This is the perfect opportunity for Steve-o to throw it in Patsy’s face via an all-out blog-off. Does he take it? So far, no. Sensitive? Absolutely not. This is justice. Strategic? Not really. Chip must get enough satisfaction knowing that the firm clear of the whole thing and doesn’t see the need for gloating. We’ve got two words for that: MISSED. OPPORTUNITY.
Because of this new cautious approach, we don’t have any parties or white whales to share this week but SC did mention that he got a little face time with SEC Chief Accountant James Kroeker. And don’t think that just anyone was invited to this little sit-down, “I was honored to be included in this very small group, which also included the CEOs of two large competitors.”
Well! We’re assuming Chip is referring to two B-I-G-F-O-U-R competitors and only since only two of them were there, this is pretty H-U-G-E opportunity for Steve. SC won’t turn down a little glad-handing with the Chief Accountant, no sir. Unfortch, he didn’t really get into what was said at the meeting but we’re sure it was a stimulating convo: Olympic fever. St. Val’s gifts for the wives. Maybe some talk about the nonexistent SEC roadmap on IFRS? Here’s to hoping that he’ll open up more this week.
Texas Stripper Tax Will Survive One More Valentine’s Day
If you’re a resident of the Lone Star State and you happen to frequent the peelers, you’re probably familiar with the $5 charge that you pay to enjoy a little bit of entertainment.
Well good news! The Texas Supreme Court has agreed to hear the case and determine if that $5 violates the First Amendment right to free expression and maybe this travesty can be put to bed once and for all.
The Texas Court of Appeals ruled the law was discriminatory against establishments that served alcohol since as Kay Bell explained then, “a play involving nudity did not trigger the tax…that meant that, had the law stood, the touring company of…Hair could have come to Texas.”
If you simply wanted to go to Treasures in Houston and have a beer and appreciate some artistic impression to Bon Jovi, Skid Row, Def Leppard, etc. then the tax applied. The $12 million that the state collected while the law was in effect is still being held in an account while they sort this out. What’s not clear is if that money will be returned to the patrons or simply given to employees of the clubs where the money was going to end up anyway.
Texas stripper ‘pole tax’ to get review [Don’t Mess With Taxes]
Five Questions with Jim Peterson of Re:Balance
We’re going to be frank; Jim Peterson is a cerebral guy. When you read his posts over at Re:Balance you never get the impression that he just rolls out of bed after a night in Wrigleyville and pounds out a post. His blogging can turn your head in knots and we think that’s a good thing.
Jim is an attorney that has spent “thirty-five years on complex multi-national matters involving corporate financial information.” He spent 19 years as in-house counsel and partner at a national accounting firm working on policy and risk management strategies.
He also spent five-plus years penning “Balance Sheet” a column for the International Herald Tribune. He now spends his time teaching risk management to MBA candidates at DePaul University in Chicago and ISEG in Paris.
Are you a CPA – Y/N?:
I am not a CPA – frequently mistaken for one, but only by those who miss the evidence that a “words guy” is on the loose in a numbers business.
If someone had to read just one post of yours which one would it be?
From May 17, 2009: “Which Accounting Firm Will Be ‘Next to Fail?’ It’s the Wrong Question” – an attempt to capture in a single post my central theme, which is the threatened survivability of the large-firm assurance franchise, the perilous condition of the Big Four business model, and the absence of real dialog on achievable solutions short of their catastrophic disintegration.
Bloggers on accounting are…
By and large driven by an instinct for the capillary. I happily give respect to those focused on the technical and operational minutia – although they are mainly keeping the deck chairs neatly arrayed on the deck of a sinking ship.
Favorite non-accounting blog…
The Soay Sheep Chronicles – by a retired couple, a big-city lawyer and an academic, who rescued and now operate a sheep farm in Oregon. Writes rings around Verlyn Klinkenborg’s pastorals in the NY Times, and teaches those of us ignorant of the subject about the opportunities for personal life-change and renewal. Full disclosure: the author is my sister.
Best accounting firm we’ve never heard of…
Financial Reporting Advisors, LLC – A Chicago boutique — alumni of the Arthur Andersen professional standards group – with a business model beautifully adapted to the hazards of today’s practice. They do no audit work, and issue no opinions. They advise global-scale companies on the intricacies of accounting standards, literature and requirements – while leaving ultimate decision-making to reside with their clients.
So they deliver wisdom and value, with virtually no litigation exposure. Their practice is one example of the available ways the profession might re-engineer its way out of the presently untenable survivability tensions in which it is entangled.
Infuriating Problem of the Day: Accountants Quitting During Busy Season
Seriously people. For most of you, this isn’t a problem. You gird up your loins, duck your head and bulldoze your way through this time of year just like you’ve done in years past. Busy season sucks. We all know that.
Who in their right mind interviews with the Big 4 et al. and is thinking, “The hours won’t be that bad,” or “I probably won’t have to travel” OR “Big 4 salaries are good enough for me”?
The Big 4 Exodus is something that has been discussed at length here but until we’ve yet to discuss this particular topic.
Yes, the trend of accounting firm layoffs is demoralizing and yes, merit increases were mostly frozen, and there were virtually no bonuses> Hell, you may working your ass off knowing that your staff makes more than you but if you’re working in mid-February, what ton of bricks hits you that causes you to conclude that bailing out on your team is the best option?
All the people we’ve had the pleasure of working with, despite all of them having multiple “F— THIS!” moments, pull it together because they have a job to do. Why the hell didn’t you quit prior to busy season? You really felt like sticking it to everyone?
Fine. Perhaps your desire for sweet, sweet revenge against your senior/manager/partner/firm is more powerful than any shred of integrity you may have but for crissakes, that makes you a very bitter person. More so than the average accountant.
Seriously? It couldn’t wait? There isn’t that much time left in busy season. And besides, if you’re patient, they may pay you to leave.
Quote of the Day: Hank Paulson Tells No Lies | 02.09.10
“We will get every penny we put into the banks back. I think when you look at all the other programs, we may be surprised at what we get back.”
~ Hank Paulson, to Warren Buffet on TARP.
Ex-PwC Associate Sues NYU to Get His MBA Back
So waaaay back in the early to mid Aughts when Ayal Rosenthal was slumming over at 300 Madison, he got a little entrepreneurial (P. Dubs auditors don’t make shit, you know) with his Dad, two brothers and a host of others. They made a little bit of extra dough ($3.7 million) by running an insider trading scheme based on various tips, some of which were related to clients that Ayal worked on at PwC.
By the grace of God, the SEC caught on to the shenanigans and busted the gang in early 2007 (was this the reason they missed Madoff, Stanford?).
For this little stunt, NYU revoked AR’s MBA after the SEC brought the charges against him. He’s now suing the University because, “the university was ‘excessive and unfair,’ and that the proceedings violated his right to a ‘fair and timely hearing’ because NYU took nearly seven months before considering his case in September 2007.”
First of all, if an academic institution gets back to you in seven months, we’d say that’s a pretty decent response time. Second, “unfair” doesn’t work on anyone.
Having said that, we know full well how hard the young lad must have worked to get that MBA, so we’re not surprised that he wants the prestigious degree back.
If NYU really wanted an airtight reason for taking his degree they should have cited his inability to dupe the SEC for less than five years. Open and shut.
NYU sued for revoked MBA [NYP]
Insider Trader Ex-Con Sues NYU For His MBA [TBI]
‘Subversive’ Organizations Must Register in South Carolina; Terrorist Tax to Follow?
Do you have a client thinking of starting a subversive organization in South Carolina? Are they looking to expand their network of businesses to include one with the expressed mission of overthrowing the U.S. government? Thought so!
Just so you know, they are required by law to register with Secretary of State and declare their intentions or they will be subject to a $25,000 fine and 10 years in prison. Let’s keep the ship tight people.
The Subversive Activities Registration Act was passed last year by the Palmetto State legislature and is now officially on the books. Oh! And there is a $5 filing fee (we attached for the form below for your convenience).
If you’re not sure if the new entity will qualify, the law defines subversive organization:
(1) “Subversive organization” means every corporation, society, association, camp, group, bund, political party, assembly, body or organization, composed of two or more persons, which directly or indirectly advocates, advises, teaches or practices the duty, necessity or propriety of controlling, conducting, seizing or overthrowing the government of the United States, of this State or of any political subdivision thereof by force or violence or other unlawful means
South Carolina, clearly not satisfied with the job being done at DHS, obviously enacted this little gem of legislation to exploit these organizations’ propensity for full disclosure. What’s the point of organizing a business with such an important purpose if everything isn’t going to be on the up and up?
The Raw Story reports that enacting redundant legislation is the norm for the Palmetto State as “[it] is among those states which require drug dealers to declare their illegal income, or face additional criminal penalties on top of the already established penalties for buying, possessing and selling drugs.”
We can only assume that the SC pols will now get to work on a new “Terrorist Tax” that will be known as the Super-Anti-American Business Sucks Act. It seems like a natural progression of the legislation there.
No joke: South Carolina now requires ’subversives’ to register [The Raw Story]
Terrorists Must Register With SC Secretary Of State [Fits News]
[h/t Joe Kristan and Russ Fox of Taxable Talk]
SubversiveAgentForm
Ex-KPMG Associate Sets New Bar for Expense Reimbursement Abuse
We meant to get to this on Friday but as you recall, our plans we’re slightly derailed by forces beyond our control. We’re sharing it now because there are lessons here for all the newbies out there. Pay attention, this could one of you.
During busy season the temptation to get a little aggressive with the expense reimbursement comes naturally to just about everyone. If you deny this particular bit of weakness then you are either A) lying through your coffee-stained teeth or B) in the wrong profession; join the clergy.
It should be noted that the abuse of reimbursement policy has relative levels of ridiculousness. Partners can rationalize and get away with more extravagant abuse than a mere associate so keep that in mind here.
So maybe every once in awhile you and some team members slip out for a three martini lunch that falls on the expensive side and you ram it through on your expense report because you figure you deserve it. Totally natch.
It gets overboard when you have the tendency to place some wagers and because you’re a degenerate loser, you start submitting expenses to fund this little gambling hobby.
Vikas Gupta was employed by KPMG until he couldn’t pass his “accountancy exams” aaaaannnnddd it was discovered that he claimed expenses of £25,000 to fund his gambling and to pay off debt. Gupta claims that he hit “various internal charge codes” to charge the expenses; which, we hear, is a typical methodology.
Gupta also claims that he suffered from depression (losing streaks will do that), is now in Gamblers Anonymous and is employed by a new firm, so he’s back on the straight and narrow.
This didn’t impress a tribunal of the Institute of Chartered Accountants for England and Wales (the AICPA of E&W), who has recommended that Gupta be banned from having provisional membership for 12 months and to be “severely reprimanded.” Since he has no means to pay fines (he entered an individual voluntary agreement), one can assume that the reprimand will consist of 30 lashes, a marathon of technical accounting trainings, or both.
Ex-KPMG trainee admits £25,000 expenses fraud [Accountancy Age]
Winners and Losers in the Overstock Restatement
With Overstock.com announcing last week that they would be restating their financial statements for the the last three quarters and their 2008 consolidated financial statements, it marked another
Comment of the Day | 02.12.10
We’ll dispense with quote of the day today in favor of the words from awwyea.
This is type of comment you should be striving for my friends.
We’ll be on a light posting schedule for the holiday on Monday. Have a great weekend and try to see your sweetheart on Sunday rather than sexting them (especially the PwC peeps).