Santee Mayor Randy Voepel has confirmed that the city will soon be searching for a new auditor.
The city’s current firm, Mayer Hoffman McCann (MHM), found itself amid scandal and controversy in July 2010 when the Los Angeles Times reported the firm “rubber stamped” a 2008-09 audit for the city of Bell.
Despite the announcement, MHM gets the pleasure of finishing Santee’s ’09-’10 audit (partner has to be LOVING it) but Mayor Voepel, not being the type to give second chances to two-bit accounting firms, is cutting them loose:
Although Voepel said that none of the people who worked on Bell’s audit have worked with Santee, he’s not interested in continuing a relationship with MHM at this time.
“We’re going out to bid for a new auditor,” he said. “Anyone that does bad deserves to be punished, and I would like to not have that particular firm perform our audits in the near future. Down the road, sure, they can quote in our bids again. But right now I’d like to get new bids.”
Possible translation: “We don’t want anything to do with these clowns. Mayer Hoffman McCann will only audit Santee, California over my dead body or impeachment after I am caught on camera at a donkey show in Tijuana.”
This is the risk to providing excellent client service to anyone and everyone; you forget to keep any of that wisdom for yourself.
A support group says it has received a record number of calls from accountants in personal debt over the past few months.
The Chartered Accountants’ Benevolent Association (CABA) for UK chartered accountants says that it has seen a sharp rise in calls from accountants with debt problems over the past few months.
CABA said that it has received its highest ever number of calls from accountants asking for help in dealing with personal debt – and expects the problem to worsen over the next few months.
Kath Haines, chief executive of CABA, said: “The number of calls that we are receiving about debt is probably at a record high and we believe that this will grow quite substantially during early 2011.
Donald Dunklee, a Richfield Township, Michigan, resident, says the sale of $23 worth of vegetables from his garden was enough to trigger an IRS audit.
“I understand the needs of the IRS to keep the honest people honest so to speak, but this seems like overkill to me,” Dunklee tells Michigan television news provider WEYI.
Dunklee operates a nearby drugstore and generates all the energy for his 20-acre home, the news source says. After haggling with the woman, Dunklee says he refused to take $50 for the food and instead the woman shoved $23 money into his pocket. He later reported this on his income taxes.
Another report says the whole thing went off without a hitch but Don Dunklee still felt like it was “a huge waste of time and resources.” (That’s a new one.) The Service, however, claims it was just a random audit. Right, like we’re supposed to believe that the IRS isn’t secretly mining 1040s for “hippie vegetable farmer income” to help fill the tax void.
“[A]n estimated 500 birds that littered a quarter-mile stretch of highway,” in Louisiana, according to the AP. Oh, and apparently in Kentucky too only numbering in the dozens, so that barely qualifies as a story.
Obviously, no one in the MSM is concerned about getting an exact body count but an “estimated 500” is certainly better than the Journal’s stab of “Between 1,000 and 5,000.”
As for the cause, well, everyone seems to have a theory but the conclusion we’re most inclined to believe is along the lines of “we’ve got no fucking idea”:
“There was probably some physical reason, but I doubt anyone will ever know what it was,” Thurman Booth, Arkansas’ wildlife services director, told CBS.
The latest occurrence of more dead birds turning up in Louisiana only compounds local residents’ worries, as in the week prior to the Arkansas blackbird mystery, 83,000 dead drum fish washed up along a river about 100 miles west of Beebe. Wildlife officials claim the incidents are not related.
Oh, right. The fish. People are needed to count fish too.
As you are no doubt aware, landing an emergency inventory count on New Year’s Eve is about as an unlucky event that can befall an auditor. Typically, you don’t miss any of the booze or scrambling for a midnight kiss but seriously, who wants to work on New Year’s Eve?
About 10 p.m. Friday, thousands of red-winged blackbirds began falling out of the sky over this town about 35 miles northeast of Little Rock. They landed on roofs, roads, front lawns and backyards, turning the ground nearly black and scaring anyone who happened to be outside.
“One of them almost hit my best friend in the head,” said Christy Stephens, who was standing outside among the smoking crowd at a New Year’s Eve party. “We went inside after that.”
The cause is still being determined, said Keith Stephens, a spokesman for the Arkansas Game and Fish Commission. Of the more than 4,000 birds that fell on Beebe, 65 samples have been sent to labs, one in Arkansas, the other in Wisconsin. Some results may be available as soon as Monday, Mr. Stephens said.
It’s doubtful that auditors in these counts but the skills involved are no less than of the classic opiner. This just happens to be a far creepier count than you would normally be assigned.
2010. What a year, amiright? It got off to a bit of a rough start after our facelift but as the year went on, things stayed interesting…most of the time. Anyway, since most of you aren’t getting Jack Squat done this week, let’s take a look back at the year that was.
1. Compensation – Shocking revelation here, we realize but – YES! – it’s true, red about most in 2010. After two years of disappointment, the Big 4 and the aspiring “Bigs” (Grant Thornton, BDO, McGladrey) all returned to merit increases and bonuses this year. PwC shot out of the gate with Ernst & Young keeping pace while KPMG remained steady but slightly behind. Deloitte, lagging behind, made a late charge with the announcement of a mid-year adjustment, which may or may not have set off a rash spreading amongst the other firms to provide bonuses throughout their fiscal year-ends. Was it a successful 2010 on the compensation front? Some say “yes,” some say “no,” but there’s little doubt about what keeps your attention.
2. PwC Email Hottiegate – Unless you were in a coma during the second week of November, you were aware of the email that listed the top 10, errr 13, new female associates that came out of PwC in Ireland. The gents who passed around the list weren’t so concerned with using work email to give the ladies the Letterman treatment and the Irish brass didn’t take too kindly to the “tradition.” This story dominated our pages for a few days and the last we knew, a total of five employees had been suspended, the women weren’t planning on lawsuits and Adrienne gave her point of view (as a member of the fairer sex).
5. Large firm vs. Small firm – An anonymous reader submitted an essay on the main differences between life in the Big 4 (and aspiring Bigs) life and that of the lives working in the smaller firms. Most have wondered what life would be like in their bizarro public accounting existence and some have actually lived it. There are pros and cons to each but life at the small firm is decidedly different.
6. An auditor’s life:
7. Layoffs – 2010 saw fewer mass layoffs than the past couple of years but that doesn’t mean there weren’t spots of cuts here and there. Most notably were the nationwide cuts at McGladrey as well as the 500 cuts made by PwC in Florida. Grant Thornton was busy slimming down its exposure in smaller markets but layoffs were not always part of the “transition” as practices were often sold or employees were giving the opportunity to transfer. And last but not least, we learned that Deloitte claimed “our bad” on their cuts from May 2009.
9. PwC Houston Happy Hour – The team happy hour. Typically a festive event filled with free booze, laughs and the occasional awkward advance. The latter allegedly took form of a partner towards an associate this past summer in PwC’s Houston office that resulted in a odd pick-up line, a sloppy kiss (our vision) and then a knuckle sand. The latest we heard was there were multiple associates approached, the partner-in-question was still with the firm and that the associate(s) involved were shipped off to other engagements. So all is well in H-town. PwC never returned our calls, emails or singing telegrams on this story.
10. Accounting Career Drama – One of the most popular series on GC is the career advice that we throw out here and there. Everything from trying to quit nicely during busy season to defection amongst Big 4 firms to explaining why your fantasy football roster is constantly on your computer screen. We’re here to help you get through the purgatory that is your time on Earth so if you’ve got a problem and want advice, email us at advice@goingconcern.com.
If we missed any of your favorites, feel free to recall your fondest memories on this here site. As we head into the new year, here’s a friendly reminder of how to get in touch with us:
If you’re a small city in California, you probably won’t be looking to Mayer Hoffman McCann to do your audits. If you’re already with them, it’s time to go auditor shopping.
Following the debacle that was Mayer Hoffman McCann’s completely blown city of Bell audits, the city of Riverside has joined the angry mob and will not be looking to renew with MHM any time soon. Riverside’s CFO Paul Sundeen said “given that the firm’s five year contract with the city is at its end and the controversy at the city of Bell, we will not include them [when seeking proposals for an auditor]”. Sorry, MHM, don’t wait by the mailbox for that invitation because you aren’t invited to the party.
Now that’s not nearly as harsh as getting fired by the client but sends a clear message to MHM (and any other questionably-equipped-to-do-their-job auditors out there) that ineptitude will not fly with the client. Unless, of course, there’s a conspiracy at work to defraud TPTB, in which case ineptitude is totally welcome if not encouraged.
Once again, it comes down to scope. No audit firm should be expected to look at every receipt and every statement but in the case of the Bell audit, auditors obviously missed some very large accounts either on purpose or because the firm sent a bunch of fresh-faced neophytes down there (this rarely happens) to actually perform the audit (Note to MHM: $8.89 million is significant unless you’re auditing the King of Saudi or the Federal Reserve). What happened to the accountability SOX promised us?
Said Riverside city controller Jason Al-Imam, “They want to do the right amount of work because they don’t want to lose their license, but they can’t audit everything. Sometimes something might go wrong and that just might be an area that they didn’t look at.”
Scraping by isn’t doing it anymore for the profession, so Riverside is more than welcome to go track down some new auditors but who wants to bet the kids doing their next audit will be just as fresh-faced and clueless as the last bunch MHM sent to fetch the client’s bank recs and invoices?
You know it was a good year when no one got sued, at least according to Asish Bhattacharyya, Professor of Finance and Control at Indian Institute of Management – Calcutta. Here are his thoughts via Business Standard:
Although there was spill over, the year 2010 for the accounting profession was overall a very good year. The Institute of Chartered Accountants of India (ICAI) could complete its task of formulating new set of accounting standards, which are fully convergent with IFRS. There was no serious allegation against the Chartered Accountancy profession. Job opportunities for young chartered accountants were plenty. The Institute of Cost and Works Accountants (ICWAI) has also done a commendable job of issuing a significant number of cost accounting standards. It could improve its image in the public eye. We may hope that the year 2011 will be an excellent year for the accounting profession.
That may come off as a bit optimistic but if the power of suggestion won’t work, perhaps a threat will. We hope that the members of the accounting profession will take note of this expectation.
Transparency International places India low in terms of ‘corruption perception index’. The score of 9-10 represents very clean. India’s score for the year 2010 is 3.3. If, India is high in corruption, professionals, particularly the accounting profession, cannot escape the responsibility. The society expects that the accounting profession will make all out efforts to eliminate corruption and that it will not use its skills and knowledge to manage corruption.
Key request being “that the accounting profession will make all out efforts to eliminate corruption and that it will not use its skills and knowledge to manage corruption.” Be careful saying things like that out loud, the big firms might get some revenue source ideas that involve exotic commodotized services packaged as “consulting and advisory”.
I don’t think we can say the same of 2010 being a good year for accounting over here in the good old U S of A (some could argue US accounting has had a badbad year) but it’s a good thing no one called us and asked us to do exactly that.
Editor’s note: This post was republished, in part, with permission from Jr. Deputy Accountant.
I’m no auditor so perhaps it’s out of line for me to say as much but since when is $8.89 million considered not significant? MHM blew it when it comes to the California city of Bell and the office of the state controller doesn’t like the “rubber-stamp” approach – maybe the state controller needs a lesson in “same as last year” and a quick and dirty primer on how audits really work. As in, they are a total farce and rubber stamps are the best we can do when we’re not checking boxes and counting chairs in warehouses on New Year’s Eve.
A prominent accounting firm’s audits of Bell’s city finances amounted to a “rubber-stamp,” according to a state controller’s study concluding that much of the alleged wrongdoing would have been detected earlier had the firm done its job.
The long-awaited report is being closely watched because Mayer Hoffman McCann audits the books of dozens of government agencies in California and has 30 offices nationwide. Officials at several agencies, including California’s public employee retirement board, have said they were awaiting the controller’s study to help determine whether they would consider changes in their auditing contracts.
The controller’s office found that MHM failed to comply with 13 of 17 “fieldwork auditing standards” when reviewing Bell’s books in the 2008-09 fiscal year. The firm focused mostly on comparing financial numbers year to year rather than looking at potential for inappropriate or illegal activities, the controller’s report said.
Don’t trip, the California Board of Accountancy is on it. Surely.
Chiang said his office is forwarding the report to the state Board of Accountancy, which regulates accounting firms in California. A board official has said it would open an investigation. If significant problems are found, penalties could range from fines to the loss of licenses. The controller also sent copies of the study to the Los Angeles County district attorney’s office and state attorney general, which have been investigating the city.
MHM strongly disputed the controller’s findings, suggesting that Bell officials deceived the firm. “Recent evidence disclosed by the controller’s office shows that Mayer Hoffman was subjected to a massive scheme of collusion that reached through every layer of city government, to undermine the audit process and deceive the auditors,” the firm said in its response.
Bill Hancock, president of the firm, said in a statement that his firm “adheres to the highest standards…. But in those 50 years we have never seen anything like the pervasive collusion of so many individuals acting in concert to deceive auditors, as happened at Bell.”
Henry Blodget crucifies Demand Media today for their accounting treatment for the cost of their “army of freelance writers” as the company attempts to go public.
As we said, Demand is trying to go public and Kara Swisher at All Things Digital writes that the latest draft of the S-1 attempts to explain some questions the SEC had on its “capitalized media content.”
Currently, using a concept of “long-lived” content, Demand has been amortizing those expenses over five years, since it says it continues to generate revenue on that material over that much time.
As the company noted in its S-1 filing:
“Capitalized media content is amortized on a straight-line basis over five years, representing the Company’s estimate of the pattern that the underlying economic benefits are expected to be realized and based on its estimates of the projected cash flows from advertising revenues expected to be generated by the deployment of its content. These estimates are based on the Company’s plans and projections, comparison of the economic returns generated by its content of comparable quality and an analysis of historical cash flows generated by that content to date.”
If you find that last paragraph hard to read, it’s because it is hard to read. Demand is essentially saying that their content is extra-special and will be making them money down the road, unlike the drivel you read elsewhere. Accordingly, this situation calls a useful life of five years and for the amortization expense to recognized over that life. That’s where Henry loses it (at least that’s the vision we have), writing that despite it being a “theoretically reasonable judgment” this whole notion of not recognizing content/editorial expenses (aka: bloggers) immediately is “bogus”:
• It’s unusual and aggressive. Other publishers don’t account for editorial costs this way
• It makes the company “profitable” when it’s actually hemorraging cash, so it is obviously a gimmick used to spruce up the financial statements
• It leads to an instant argument/interrogation about how long a writer’s content will ACTUALLY be valuable (and Demand Media hasn’t even been around for five years, so confidently saying “five years” begs more questions)
• It is an EASY knock against a company that is controversial anyway
For these reasons, Demand Media should just drop this accounting immediately.
But going back to Swisher, the company has an explanation – it’s mathematical! So, it just works, mmmkay?
To be allowed to expense over five years, Demand said, the company has to use a sophisticated algorithmic platform–which other content creators do not have–to provide proof of “probable economic benefits” from that content over that time.
Since Demand has long claimed that it has a new and innovative approach to content creation, it is making the case to investors that it needs to have the correct accounting for that approach.
OH! Since you have rocket scientists on the job, it’s totally legit. NOW WE GET IT. But despite having someone John Nash-esque on staff, the company admits that there is a big catch:
Changes from the five year useful life we currently use to amortize our capitalized content would have a significant impact on our financial statements. For example, if underlying assumptions were to change such that our estimate of the weighted average useful life of our media content was higher by one year from January 1, 2010, our net loss would decrease by approximately $1.6 million for the nine months ended September 30, 2010, and would increase by approximately $2.4 million should the weighted average useful life be reduced by one year.
In other words, if the company can’t use five year amortization for its content, things will get ugly fast (Blodget illustrates with an example). The whole thing has caused enough of a ruckus that the IPO is being put off until next year which, considering there’s probably lots of tricky stuff involved (x’s and y’s and whatnot), seems like a good idea.
The Board of Trustees of the Financial Accounting Foundation (FAF) today named Leslie F. Seidman chairman of the Financial Accounting Standards Board (FASB), effective immediately. Ms. Seidman has served as the acting FASB chairman since the retirement of Robert H. Herz on September 30, 2010.
“Our Board of Trustees is thrilled that Leslie Seidman has agreed to accept the position as Chairman of the FASB. She brings both unparalleled standard-setting experience and outstanding leadership skills to her new role,” said FAF Chairman John J. Brennan. “As the FASB continues its efforts to address the many significant accounting and financial reporting issues both here in the U.S. and globally, Leslie’s depth of experience with international and domestic financial reporting issues will enhance our progress toward meeting the needs of all of our varied constituents. On behalf of the FAF Trustees, we are delighted that she will be leading the FASB’s efforts to tackle these many challenges for the betterment of capital markets participants both here and abroad.”
How does Les feel about being the new punching bag of the anti-IFRS contingent, House Financial Services Committee, the American Bankers Association and countless letters and emails of ridicule? Pretty good, actch:
“I am honored to be leading the FASB at such a pivotal time in our history,” said Ms. Seidman. “The FASB remains committed to developing standards that will provide investors and other capital providers with decision-useful information. We are at a crucial point in our convergence program, and my fellow Board members and I are working in close partnership with the IASB to improve the comparability of financial information around the world. We want our standards to enhance communication and confidence in financial reports, and we will continue to seek new ways to keep our stakeholders informed and engaged in the standard-setting process.”
It’s just accounting rules after all, how bad could it be?
A respected accountant who turned his home into a brothel was caught in the act when police swooped and found him naked in bed with his Chinese mistress, surrounded by money.
“Respected accountant” Leslie Baleham received a year in prison after his house effectively became a brothel that managed to serve 400 men during a three-month stakeout, according to a report in the Daily Mail. How would an otherwise mild-mannered accountant get tangled up in such a mess? Love, of course!
The court was told that Baleham had been ‘smitten’ with his younger woman – who was a main figure in running the brothel.
Adrian Reynolds, prosecuting, said: ‘Never was the relationship between sex and money more clearly to be seen.’ [Ed. note: Oh, British wit.] The pair, who ran the brothel for two years, had a joint bank account and had paid in £57,000 – including £7,000 he had made in rent. Harry Bowyer, mitigating, told the court that Baleham was not involved in the day-to-day running of the brothel, and was effectively just a landlord. He said: ‘Baleham felt he was having a relationship with her. Now he feels he has been used by her. He is now divorced from his wife.’
2010. What a year, amiright? It got off to a bit of a rough start after