Category: News

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 apprect 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.