Category: News

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

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


India’s Financial Express:

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

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

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

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

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

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

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

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

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 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]