October 31, 2020

SEC

If the Economy Gets Any Worse You Can Always Find a Promising Career In Snitching

Browsing our stats on any given day, I can’t help but notice how many people arrive at this website by Googling “careers after public accounting” or some variation of such. “Fuck public accounting” is also a popular one, I can’t possibly imagine why. Given the current economic environment, we’ve seen an uptick in searches of […]

Here Are 6 Reasons Why the SEC Whistleblower Program Is Successful

In response to the 2008 financial crisis, Congress passed the Dodd-Frank Act in July 2010, which, among other things, created the SEC Whistleblower Program. A decade later, the program has proven to be successful in generating high-quality information regarding securities laws violations that have enabled the SEC to halt fraud schemes and protect investors. Since issuing […]

So What If the SEC Swallowed the PCAOB?

Skepticism is called for in reaction to the budget proposal to roll up the U.S. audit regulator, the Public Company Accounting Oversight Board, into the Securities and Exchange Commission, its statutory overseer. Do not mistake this reluctance to join the anxieties voiced by the usual suspects—among them former SEC chairman Arthur Levitt and former PCAOB chairman Jim […]

SEC Employees In DC Will Be Working From Home for the Time Being

While some accountants are wondering why their firms haven’t told them to just work from home until the coronavirus hysteria dies down, the SEC told its employees in Washington, DC, just that in an email yesterday. The Washington Post reported: The Securities and Exchange Commission on Monday asked employees at its D.C. headquarters to stay […]

Unsurprisingly, James Doty Is Not a Fan of the PCAOB Possibly Being Folded Into the SEC

The former PCAOB czar joins a group of people that includes ex-SEC chairman Arthur Levitt, former PCAOB interim chairman Dan Goelzer, and others who say the Trump administration’s 2021 budget proposal to consolidate the duties of the audit regulator under the SEC starting in 2022 would be a big mistake. In a blog that was […]

Let’s See What Some Folks Are Saying About the Proposal to Fold the PCAOB Into the SEC

Since we posted our take last week about the Trump administration’s fiscal year 2021 budget proposal to eliminate the PCAOB and fold its duties into the SEC by 2022, we’ve gotten some emails from accountants about what they think of the PCAOB. Most of them have been negative, like this one: Reducing or better yet, […]

Could We Soon Be Living In a PCAOB-less World?

I cut out of the office early yesterday afternoon to watch my oldest daughter’s junior high basketball game, thinking: “It’s a slow news day, I’m not missing out on anything.” It wasn’t until I had my first cup of coffee this morning that I saw a couple of articles posted yesterday afternoon, including one from […]

SEC Takes Away Privileges From Another Felon In KPMG/PCAOB Scandal

David Middendorf’s trial buddy, Jeffrey Wada, the now-former PCAOB inspections leader who fed confidential information about upcoming audit inspections to some folks at KPMG, including Middendorf, in the hopes of landing a job at the Big 4 firm, is now prohibited from appearing or practicing before the Securities and Exchange Commission as an accountant. Wada’s […]

Convicted Ex-KPMG Partner David Middendorf Suspended By the SEC

Another “KPMG 5” executive who will be serving prison time for his role in a scheme to steal confidential audit inspection lists from the PCAOB was suspended today from appearing or practicing before the Securities and Exchange Commission as an accountant. The SEC released the following two-page order of suspension against David Middendorf, former national […]

Jailed Ex-KPMG Executive Director Barred By the SEC Because Why Not?

Cynthia Holder, one of the “KPMG 5” who was sentenced to eight months in federal prison in August for her role in a scheme to steal confidential audit inspection information from the PCAOB, was “denied the privilege” of appearing or practicing before the SEC as an accountant, the commission announced on Nov. 29. The SEC […]

It’s That Time of Year When the SEC Gets Braggadocious

Now that the SEC is a little more than a month into its new fiscal year, the commission wanted to remind everyone that its enforcement division staff didn’t spend FY 2019 watching porn at work all day long. Yep, the SEC Division of Enforcement 2019 Annual Report is hot off the press, and in it […]

Senators to SEC Chair Jay Clayton: What the Hell Is Going On At the PCAOB?

It seems we weren’t the only ones who were disturbed by the Wall Street Journal article last week detailing the dysfunction at the PCAOB under the tremendous leadership of chairman and meetings hater William Duhnke. In a letter dated Oct. 17 to SEC Chair Jay Clayton, Sens. Sherrod Brown (D-OH) and Jack Reed (D-RI) called […]

The SEC Got Rid of the Only PCAOB Member Not Drinking the William Duhnke Kool-Aid

Ladies and gentlemen, THIS is the current state of your PCAOB under the leadership of William Duhnke, according to the Wall Street Journal: A watchdog tasked with protecting investors by policing audits of public companies has slowed its work amid board infighting, multiple senior staff departures, and allegations that the chairman has created a “sense […]

SEC Fines and Bans Three Accounting Firm CPAs for Not Doing Their Jobs Very Well

Three CPAs from a New Jersey public accounting firm most of you probably have never even heard of got their wrists slapped by the SEC on Sept. 30 for signing off on the audits of an IT company’s financial statements, even though the company’s CEO and CFO were perpetuating a massive fraud. Schulman Lobel Zand […]

Finding a Good CFO Is So Hard Companies Are Just Making Them Up Now

h/t Sam Antar for shooting this story our way. If you have a story you think we should cover go ahead and use the contact info at the bottom of this post to get in touch. Finding a good CFO is tough. So tough, in fact, that one company recently got in a bit of […]

PwC Fined $7.9 Million By the SEC for Making Pretty Dumb and Obvious Independence Violations

About a month ago, we chided RSM US for being fined $950,000 by the SEC for getting caught providing non-audit services to audit clients, saying that a firm like RSM should’ve known better. But PwC got busted today by the SEC for also doing non-audit work for audit clients, which pretty much reinforces how shady […]

RIP James Schnurr, Former SEC Chief Accountant

The SEC confirmed last night some sad news we saw being shared on Twitter yesterday that former Chief Accountant James Schnurr has passed away. SEC Chairman Jay Clayton said in a statement: “Jim was a dedicated and respected public servant who left us far too soon. While at the Commission, he was committed to establishing […]

RSM US’s $950,000 Fine Is a Reminder That Performing Non-Audit Services for Audit Clients Can Get You Into Trouble

You’d think a firm like RSM US would know this by now, but guess not. The Securities and Exchange Commission today charged public accounting firm RSM US LLP with violations of the agency’s auditor independence rules in connection with more than 100 audit reports involving at least 15 audit clients. Yes, auditor independence is a […]

Ex-KPMG Partner’s Broker Probably Won’t Be Doing Any Insider Trading For a While

The last man standing in the KPMG insider trading case (the one not involving Scott London) has finally fallen. From the SEC: Today [Aug. 14], jurors in Atlanta federal court returned a verdict finding New Jersey securities broker Raymond J. Pirrello, Jr. liable for insider trading in advance of three merger and acquisition transactions. Pirrello […]

Ex-KPMG Partner Will Be Giving the SEC a Bag Full of Money

We have an update on one of the members of Caleb’s fantasy KPMG insider trading golf team. From Law360: With a trial looming, a Georgia federal judge has granted approval of the U.S. Securities and Exchange Commission’s settlement with a former KPMG LLP partner accused of tipping off a stockbroker about the upcoming acquisitions of […]

What Price Wrong-Doing? Sanctions Against KPMG Are Complicated

“Sell in May and go away” was an investors’ adage invoked as vacation strategy in a more genteel era. Returns in the summer were said to lag the rest of the year—and in any event, that’s how brokers justified their holiday cottages on the eastern seaboard. This year the maxim has twice failed my attempt […]

The SEC Removed ‘Acting’ From Sagar Teotia’s Job Title

Sagar Teotia is officially your new chief accountant at the SEC, a position he had held in an acting role since Wesley Bricker surprisingly announced he was stepping down as chief accountant in June. Teotia definitely has the chops for the chief accountant office. He had served as deputy chief accountant under Bricker since 2017 […]

SEC Says $50 Million Fine For KPMG Is ‘Significant’ and ‘Appropriate’ For All That Cheating Going On

The SEC made official today the news that Dave Michaels of the Wall Street Journal broke late last week, announcing that KPMG will pay $50 million to settle allegations that former partners “stole the test” by using confidential information that was being fed to them by a PCAOB insider to improve the firm’s performance on […]

$50 Million Fine SEC Is Reportedly Giving KPMG Over PCAOB Scandal Isn’t Big Enough

Dave Michaels of the Wall Street Journal broke some huge news late last night about a huge fine the SEC could levy against KPMG later this month because of several former partners’ involvement in one of the biggest U.S. accounting scandals in recent years—stealing secret audit inspection information from the PCAOB. KPMG LLP is preparing […]

Wesley Bricker Is Stepping Down As SEC Chief Accountant

This just in from the SEC: The Securities and Exchange Commission today announced that Wesley R. Bricker, Chief Accountant, plans to leave the agency after more than six years of distinguished service. Mr. Bricker was named as the SEC’s Chief Accountant in 2016, after serving as the deputy chief accountant. Earlier, he served as a […]

Former SEC Chief Accountant Broke His Neck In 2016 Bike Crash, Awarded $41 Million In Damages By Jury

Back in July 2016 when I was working at AccountingWEB, I remember an SEC press release coming across my virtual desk announcing that Wesley Bricker had been named interim chief accountant. I remember thinking, “Wait, what happened to James Schnurr? He had just spoken at some accounting conference, somewhere, about something, it seemed.” The July […]

Two Internal Auditors Thought They Could Get Away with Insider Trading, LOL

Two internal auditor buddies got a starring role in an SEC litigation release after they were charged with insider trading for monkeying around with secret information about their respective employers. Lloyd Schuman, a former senior internal auditor at Verso Corp., and Dane Janes, an internal auditor with Ashford Hospitality Trust Inc., agreed to pay a […]

It Seems the PCAOB and SEC Are Giving Accountants the Benefit of the Doubt More These Days

Maybe it’s because the PCAOB had a new chairman and a whole new board at the beginning of last year. Or maybe it’s because the audit regulator’s longtime enforcement chief bolted last May and the position still hasn’t been permanently filled. Whatever the reason, the PCAOB settled only 13 enforcement actions against accountants in 2018, […]

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Accounting Fraud Watch: Jumio Founder, Former College Controller, Ex-Roadrunner Execs

We arrived late to a couple accounting fraud settlement parties thrown by the SEC recently. All the Lagunitas and buffalo chicken dip were gone, and we were stuck drinking Busch Light and munching on carrot sticks. But we’ll still recap what happened at these shindigs anyway. Silicon Valley startup Jumio’s ex-CEO settles SEC fraud charges […]

As a Result of Breaking SEC Rules, Deloitte Japan Is $2 Million Lighter In the Wallet

There was some bad decision-making going on at Deloitte Touche Tohmatsu in Japan. Dozens of its employees had bank accounts at the subsidiary of a client for which Deloitte Japan issued audit reports, which is a no-no because Securities and Exchange Commission rules don’t allow accountants to have bank accounts with audit clients that have […]

New Year’s Eve Was Kind of a Bummer for Hertz

Man, I hope executives at Hertz got shitfaced on New Year’s Eve, because being told the company has to pay a $16 million civil penalty to the Securities and Exchange Commission to settle a case involving numerous accounting violations is not a stellar way to end 2018/begin 2019. An SEC cease-and-desist order filed on Dec. […]

SEC Got All Grinchy on Crowe, Four Partners for Bad Banana of an Audit

We interrupt your Christmas Eve merriment to bring you this press release from the Securities and Exchange Commission, which on Dec. 21 announced not-so-glad tidings about Crowe LLP’s audit team: The Securities and Exchange Commission today filed settled charges against national audit firm Crowe LLP, two of its partners, and two partners of a now-defunct audit […]

Longtime KPMG Client General Electric Looking to Mess Around with Another Audit Firm

109 years. That’s how long KPMG has been General Electric’s auditor. When that engagement started, the rotund William Howard Taft was in the White House, there were 46 states in the U.S., and the start of World War I and Babe Ruth’s professional baseball career were still five years away. But the spark in the […]

Elon Musk smoking a blunt

Elon Musk Made It Clear He Gives an Immaterial Number of F*cks About the SEC

ICYMI, Elon Musk appeared on 60 Minutes on Sunday, and while it wasn’t quite as good as him sparking a blunt on Joe Rogan’s podcast, it was still a tad incendiary. Musk’s beef with the SEC started in August when he tweeted that he was “considering” taking Tesla private at $420 a share (LOL 420, […]

eBay’s Former Director of SEC Reporting (and Deloitte Alum) Charged With Insider Trading By SEC

A CPA who once was the director of Securities and Exchange Commission reporting for eBay Inc. was charged with insider trading by the SEC on Sept. 28 for allegedly using insider information ahead of a PayPal Holdings acquisition to make nearly $36,000 in illegal trading profits, according to documents released on Oct. 16. Bryan Long, […]

How Do We Fraudulently Boost Revenues for Thee? Let Me Count the Ways

If you’re going to get busted for using fraudulent accounting practices to artificially inflate your company’s revenues, you might as well make it worth your while—or at least worth the fine you’re going to have to pay to the Securities and Exchange Commission. The SEC levied fraudulent accounting charges against Tangoe, formerly a public telecommunications […]

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Federal Judge Strikes Down Ex-KPMG Partners’ Request for SEC Evidence Search

If you’re dying to know what’s going on with David Britt, David Middendorf, and Thomas Whittle, the former KPMG partners who are accused of participating in a scandal in which confidential Public Company Accounting Oversight Board inspection information was leaked to the accounting firm, Law360 has an update: A group of former and would-be KPMG auditors […]

PCAOB Told SEC ‘Hold My Drink,’ Went All Enforcement-Crazy on Accountants in 2017

2017 was a banner year for the Public Company Accounting Oversight Board when it came to enforcement actions against accountants. For the Securities and Exchange Commission, not so much. The PCAOB finalized 35 enforcement actions involving “accountants”—otherwise known as CPAs employed by SEC registrants, auditors, and audit firms—last year, up from 28 in 2016, according […]

SEC Calls Off the Dogs on Exxon Mobil

Exxon Mobil Corp. is out of the Securities and Exchange Commission’s doghouse for now, as the regulator ended its two-year accounting investigation into how the company calculates the value of its assets, as well as possible oily investor disclosures about climate change. According to a Bloomberg News report, Exxon Mobil received a letter from the […]

Iced Tea

The SEC Would Like a Word With Long Blockchain

Back in my day, it was enough to take an iconic cola brand and make a clear version to boost stock prices. Of course, that didn’t exactly work out for Pepsi in the long term either. In December of last year, New York-based Long Island Iced Tea Corp. changed its name to Long Blockchain Corp. and […]

Earnings Forecasts Look Sunnier When You Put GAAP in the Shade

More and more of the largest companies in the United States are using their favorite nonstandard accounting metrics to forecast earnings, and as long as the Securities and Exchange Commission allows it, they’ll continue to do it. For example, Newell Brands Inc., which makes Sharpie markers and Rubbermaid containers, forecasts that a key measure of […]

Toshiba Seems to Have Escaped SEC Penalty After Accounting Probe Ends

It was reported in March 2016 that the Securities and Exchange Commission and the Justice Department were investigating the “accounting problems” at Toshiba Corp.’s business units in the United States. Well, according to Reuters, the SEC has completed the investigation, and Toshiba is likely breathing a sigh of relief. “We understand that all SEC investigations […]

SEC in No Rush to Make a Decision on PCAOB Chair

SEC Chair Mary Jo White said that she'll wait until two new commissioners are appointed before deciding on whether James Doty will remain the head of the PCAOB. Currently, the SEC only has three commissioners after Dan Gallagher and Luis Aguilar both left last year. But how long do we have to wait?! That all […]

At Least One SEC Commissioner Has a Sense of Humor

Michael Piwowar made a funny: Imagine a world where GAAP or other reporting standards did not exist – where management could develop its own numbers based on its own poorly-defined criteria.  Management might be tempted to create numbers that provide the illusion of performance but in reality are largely irrelevant to measuring the actual performance […]

Auditors, PCAOB Earn Attaboys From SEC Chief Accountant

SEC Chief Accountant James Schnurr says that, although "there's room for improvement" audit quality "is getting better" and the PCAOB has "deepened their expertise" and "their inspection process has matured." This explains why we've seen more deficiencies, he says. I'm sure KPMG appreciates the vote of confidence. [AT]

The SEC Put Out Its 2015 Highlight Reel

The SEC's fiscal year wrapped on September 30, so naturally, they wanted to take a victory lap with their enforcements results. Among the accounting and auditing highlights brought up are: Computer Science Corporation's manipulation of "accounting models that artificially increased its profits but had no basis in reality." Deutsche Bank's overvalued derivatives that exposed them […]

FASB Supports the SEC’s Commitment to Tiptoeing Around IFRS Adoption Indefinitely

This week, the AICPA Conference on Current SEC and PCAOB Developments is going down in Washington and unfortunately I am missing it this year as I'm due in Dallas this week for AccountingWEB Live which is exponentially more exciting (or something). Today, SEC Chief Accountant Jim Schnurr reiterated the commission's commitment to pussyfooting around any […]

A Quick and Dirty Guide to Getting Away With Insider Trading

Insider trading: the classic white collar money-making scheme. Do it right, and you’ll amass a fortune. Screw it up, and you’ll wind up stamping out license plates and teaching ethics CPE from behind bars with Scott London. We're here today to tell you how NOT to get caught because who knows, some day you may […]

This Massive SEC Whistleblower Award Will Make You Wish You’d Seen Something and Said Something

The Securities and Exchange Commission today announced an expected award of more than $30 million to a whistleblower who provided key original information that led to a successful SEC enforcement action.  The award will be the largest made by the SEC’s whistleblower program to date and the fourth award to a whistleblower living in a […]

How I Learned to Stop Hating Networking and Love Mary Schapiro

A few months ago, my boss sent me to a business conference to learn technical stuff but mostly to network. If someone had told me years ago how much networking and ass-kissing the accounting profession actually involves, maybe I would have rethought my career path and become a statistician or something. The only thing I […]

The SEC Is Tired of Procrastinating Late Filers Taking Their Sweet Ass Time

The SEC announced action yesterday against 28 officers, directors, or major shareholders for violating federal securities laws requiring them to promptly report information about their holdings and transactions in company stock. Additionally, six publicly-traded companies were charged for contributing to filing failures related to this chronic procrastibation. From the SEC release: The charges stem from […]

Former SEC Chief Accountant Predictably Curmudgeony About the SEC’s New Chief Accountant

Financial Executives International (FEI) has a pretty good piece on the struggles newly-announced SEC Chief Accountant Jim Schnurr will face in his time at our favorite porn-loving securities regulator. You should go read it. Like the whole thing. Make sure you don't miss this part: Lynn E. Turner’s take on the matter, perhaps not unsurprisingly […]

SEC Names a New Chief Accountant, You’ll Never Guess Where He Worked Before

Did you like that lame Upworthy headline? Did it get you to click on this? Sorry about that, you're about to be disappointed. The Securities and Exchange Commission today announced it has named James Schnurr as its chief accountant.  Mr. Schnurr will begin his new post in October.  He will replace Paul A. Beswick, who […]

SEC Steps In to Stop Sketchy City Comptroller From Bankrupting City on Bad Bond Deals

The city of Harvey, IL has angered the SEC with some shady bond offerings to the point that the SEC felt it appropriate to obtain an emergency court order to stop these clowns from issuing these bonds: The SEC has filed fraud charges in U.S. District Court for the Northern District of Illinois against the […]

The SEC Is On An Insider Trading Losing Streak

The U.S. Securities and Exchange Commission, in a third insider-trading trial defeat in the past year, lost its lawsuit claiming STEC Inc.’s former chief executive officer made $134 million by selling stock before divulging a sales setback to investors. Federal jurors in Santa Ana, California, returned their verdict on the first day of deliberations. The […]

SEC Working On Protecting Ridiculously Rich People From Investing In Stupid Startups

Since 1982, the SEC has defined an "accredited investor" as someone with $1 million sitting around collecting dust or annual income of $200,000 in each of the previous two years with the reasonable assumption of making at least $200,000 in the year ahead. In 2006, Chris Cox wanted to bump that up to $3 million, […]

Ex-Deloitte Chief Risk Officer Learns Not to Gamble with Independence the Hard Way

As everyone who is anyone knows, it's important to maintain independence in both fact and appearance. James T. Adams — once Chief Risk Officer at Deloitte's San Francisco office — was reminded of that part of CPA Ethics 101 today when the Securities and Exchange Commission charged him for causing violations of the auditor independence […]

The SEC Has Warned Against Investors Putting all Their Money into Marijuana

Thank goodness we have the SEC to protect us from ourselves. The SEC sent out a warning today cautioning investors to be on the lookout for shady "microcap companies that claim their operations relate to the marijuana industry after the agency suspended trading in the fifth such company within the past two months." The SEC […]

SEC Chief Accountant Paul Beswick Is Leaving For the Private Sector

The SEC announced today that Chief Accountant Paul Beswick is out, with his sights set on the private sector. He'll hang around for a bit (a "transitional period" for you corporate drones) to make sure his exit doesn't screw up all his hard work over the last 2 years. Beswick first joined the SEC in […]

SEC Charges BP Insider With Cleaning Up His Portfolio After the Deepwater Spill

The Securities and Exchange Commission today charged a former 20-year employee of BP p.l.c. and a senior responder during the 2010 Deepwater Horizon oil spill with insider trading in BP securities based on confidential information about the magnitude of the disaster.  The price of BP securities fell significantly after the April 20, 2010 explosion on […]

The SEC Wants You to Know What Ponzi Scheme YouTube Videos Look Like

It's kind of like an infomercial but with fewer incompetent idiots trying to accomplish basic tasks like using Tupperware and cracking eggs. Before we get to the video, let's get to the press release from the SEC: The Securities and Exchange Commission today announced fraud charges and an asset freeze against the operators of a […]

Retired SEC Lawyer Calls Agency Penalties “At Most a Tollbooth on the Bankster Turnpike”

James Kidney, who joined the SEC in 1986 and retired this month, offered the critique in a speech at his goodbye party. His remarks hit home with many in the crowd of SEC lawyers and alumni thanks to a part of his resume not publicly known: He had campaigned internally to bring charges against more […]

Crime May Not Pay But Whistleblowing Certainly Does

The Securities and Exchange Commission today announced that the whistleblower who received the first award under the agency’s new whistleblower program will receive an additional $150,000 payout after the SEC collected additional funds in the case. The whistleblower, who the SEC did not identify in order to protect confidentiality, has now been awarded a total […]

Investors Want Disclosures That Make Sense; Also a Pony, World Peace

This according to Compliance Week: “Investors pretty much said to a person they're not turning down disclosure,” says Kenneth Daly, president and CEO of the National Association of Corporate Directors, which recently convened an investor summit to hear from major investor groups. “At the same time, they made it abundantly clear, there are lots and […]

The SEC Wants a Bigger Allowance Because Robots

The U.S. Securities and Exchange Commission needs more money to properly police equity markets and detect potential misconduct, especially in a world of rapid-fire trading, SEC Chair Mary Jo White told lawmakers on Tuesday. "We… have focused intensively on potential misconduct in the equity markets," White told a U.S. House of Representatives appropriations panel in […]

Being a Good Husband Means Listening to Your Wife, Except When Insider Trading is Involved

Women everywhere who are convinced men never listen might gain just a small sense of satisfaction out of these two clowns who — despite getting in trouble with the SEC — prove that not all dudes check out once the lady starts talking. “Spouses and other family members may gain access to highly confidential information […]

Who Needs a CFO When You Have an Ex-KPMGer Running the Show?

Colin already got to this L&L Energy LOLery in ANR but in case you missed it, here's just a teaser from the SEC: The SEC’s Enforcement Division alleges that L&L Energy Inc., which has all of its operations in China and Taiwan, created the false appearance that the company had a professional management team in […]

Idiots Accused of Insider Trading Used Sketchy Post-It Method, Creative Digestion

Insider trading accusations are often boring, routine and totally predictable. But this reads like something out of a poorly-written detective novel, for real: The Securities and Exchange Commission today charged a stockbroker and a managing clerk at a law firm with insider trading around more than a dozen mergers or other corporate transactions for illicit […]

Deloitte Client and Trading Firm Wants to Go Public, Admits To Being Awful at Accounting

Anyone who has ever struggled through Intermediate or scored two consecutive 74s on FAR can tell you accounting is hard, man. But when you're in the financial business and hoping to go public, there is a minimum expectation that you at least have some idea what you're doing before you invite the auditors over to […]

SEC Floats the Idea That the More You Pay For an Audit, The Better the Audit Will Be

We'd say you heard it here first, kids but actually you heard it from CFO Journal: U.S. securities regulators are wary that pressure to reduce auditor fees could lead to worse audits. Regulators grow “worried” when auditor fees appear to fluctuate with economic cycles, Paul Beswick, chief accountant at the Securities and Exchange Commission, said […]

The SEC’s Four Year Plan Conspicuously Missing a Commitment to IFRS

The SEC is the worst long-distance boyfriend ever. For years it's been telling the IASB to just be patient and one day, they'll move in together, into an apartment with mostly the IASB's furniture except for the SEC's favorite ratty recliner and big screen TV. And everything will be wonderful! But the SEC's latest Strategic […]

The Allscripts Director of Corporate Audit Accused by SEC of Insider Trading Once Worked at Deloitte

Feel free to refer to our earlier post about Steven Dombrowski's trouble with the SEC. So, there wasn't much about our pal Steve in the SEC complaint, but that's what interns are for. I put my kitten to work against Google and she was able to pull up this now-removed LinkedIn profile that tells us […]

Chicago CPA Charged By SEC For Insider Trading on His Wife’s Account

OH MAN. Someone is going to be in the doghouse for quite some time. Let's take a look at what this clown allegedly did: The Securities and Exchange Commission announced that it filed a civil enforcement action against Steven M. Dombrowski, a C.P.A. and formerly Director of Corporate Audit at Allscripts Healthcare Solutions, Inc. ("Allscripts") […]

Per the SEC, Insider Trading Is Not the Right Way to Start a Hedge Fund

Meanwhile, in the land of SEC complaints: The Securities and Exchange Commission today charged a senior portfolio manager at Microsoft Corporation and his friend and business partner with insider trading ahead of company announcements. The SEC alleges that Brian D. Jorgenson, who lives in Lynwood, Wash., obtained confidential information about upcoming company news through his […]

SEC Union Warns SECers They Should Learn To Shovel Lunch Into Their Faces In a Prompt Manner

Of all the SEC's "time management" issues (I need not mention to what I am referring), is lunch really up there? Apparently so: Add the ability to eat quickly to the list of skills needed to work at the U.S. Securities and Exchange Commission. In a dispute that has sent pangs of resentment — and […]

Ex-SEC Chief Accountant Taking His Experience in Unfinished Business to the FASB

James Kroeker, 44, will be a vice chairman of the U.S. Financial Accounting Standards Board, the board's parent organization, the Financial Accounting Foundation said in a statement on Wednesday. Kroeker is known for handling difficult policy decisions during the 2008-2009 financial crisis and will face projects that have been slowed by disagreements between board members and […]

Yes, the House Bill That Bans Auditor Rotation Is Terrible But There May Be an Upside

As you know, yesterday the House of Representatives passed H.R. 1564, the Audit Integrity and Job Protection Act, with bipartisan support, 321-62. The charge was led by the bill's co-sponsors, Rep. Robert Hurt (R-VA) and Rep. Gregory Meeks (D-NY). Here's an enthusiastic statement from Rep. Hurt via Accounting Today:

SEC Creates The Accounting Fraud Untouchables (or Something)

The Financial Reporting and Audit Task Force is one of the three new initiatives in the DepartmentDivision of Enforcement that were announced by the Securities and Exchange Commission today. So if you're one of those people that cause Andrew Fastow to blush, then you're likely to be right in the FRATF's wheelhouse:  The Financial Reporting and Audit Task Force will […]

The SEC Manages to Get Softer on Big 4 Audit Firms

Incredibly, the SEC has done something I didn't think was possible. It has, in its implicit blessing of Herbalife's selection of PwC as auditor, given the Big 4 and other audit firms more leverage in future debates over independence with regard to past non-audit services. And the last thing the Big 4 needs is more […]

The SEC is Developing an Army of Robots to Replace You

You're an accountant, so I'm going to assume you have self-esteem issues. On the off chance you were starting to think that your existence might be meaningful, the SEC announced that it's working on a project that may have the potential to eventually make your job completely irrelevant. The project is called the Accounting Quality […]

It’s Not Every Day That 50 Cent Gets Mentioned in an SEC Filing

Curtis Jackson III gets a shout-out in this As Seen on TV, Inc. 8-K under "Other Events": On April 30, 2012, TV Goods Inc. (“TVG”), wholly-owned subsidiary of As Seen On TV, Inc. (the “Company”), announced that it entered into a Distribution and Marketing Agreement dated March 15, 2012 (“Distribution and Marketing Agreement”) with SMS […]

SEC Concludes That It Doesn’t Need to Kick Overstock.com on the Way Down

The financial gumshoes at the SEC have closed their investigation of Overstock.com and have concluded that no enforcement action is necessary. Naturally, former Arkham Asylum resident and current Overstock.com CEO Patrick Byrne sees this as a vindication: "We are the ones who brought all these matters to light, we made the corrections, we fully disclosed these […]

From the Sounds of It, Small Companies Better Learn to Love IFRS

SEC Chief Accountant James Kroeker is "hopeful" that the SEC can figure something out re: IFRS in the coming months but if you're a controller/CFO type at a small company who thought that this wasn't going to be your problem, Jim has news for you: He downplayed the notion of smaller firms being able to […]

Occupy the SEC Sends a 325 Page Comment Letter On the Volcker Rule

Ah, the Volcker Rule… an allegedly sublime piece of legislation that keeps the Goldman rats from doing things like betting against clients and raking in an extra million a day. Love it or hate it, you have to admit it's a step in the right direction if you're at all familiar with its intent. Of […]

Jeanette Franzel, CPA, CIA, CMA, CGFM, Is Your New Public Company Accounting Oversight Board Member UPDATE: And Not Everyone Is Impressed!

The overlords at the SEC have spoken and sweet Jesus in a manger, they like letters behind a name. Ms Franzel will replace Dan Goelzer who is a founding member of the Board and served as its perpetually acting chair from August 2009 to January 2011.  Franzel is dumping the Government Accountability Office, where she […]

PCAOB Has an Extra $20 Million to Spend on Field Trips to China

PCAOB Chairman James Doty shot the breeze with the SEC for awhile today, speaking about, among other things, how the Board would handle this boatload of Chinese filers who don't seem to know their asses from their elbows when it comes to accounting and their auditors who are similarly clueless. Doty assured the Commission that […]

Judge Would Like Someone To Look Her in the Eye and Explain Why Deloitte Isn’t Complying with a SEC Subpoena in Relation to a Company That Held Audit Workpapers Hostage

Remember Longtop Finanical? That's the Hong Kong-based company that Deloitte kicked to the curb last May for a number of sketchy reasons that included the "the unlawful detention of DTT's audit files." We came to learn later that not only were the precious audit files taken hostage but that Deloitte auditors were thisclose to becoming hostages themeselves. […]

Right Now KPMG CEO John Veihmeyer Is Locked in His Office Watching This Clip From “Rudy” Over and Over and Fighting Tears

This far from being Notre Dame's Jerry Sandusky moment but it still has to hurt.  The Securities and Exchange Commission today charged Daniel Ruettiger and 12 other participants in a scheme to deceive investors into buying stock in his sports drink company. Ruettiger is widely known for having inspired the 1993 motion picture "Rudy." According to […]

SEC Needs More Time to Get Their Heads Around IFRS

A recommendation on whether U.S. companies should switch to international accounting rules will take a few more months, the Securities and Exchange Commission’s chief accountant said Monday. The SEC’s staff had been expected to make a recommendation by year-end on whether U.S. companies should adopt the global rules, known as International Financial Reporting Standards. But the staff needs “a few additional months” to complete its work, SEC Chief Accountant James Kroeker said. [WSJ]

SEC Asking FASB About Looking Into That MF Global Accounting Thingamajig

Because, you know, it’s sorta tricky and it didn’t really turn out so well for Corzine & Co.

The SEC is in talks with the Financial Accounting Standards Board, which sets accounting standards, about “repurchase-to- maturity” agreements that MF Global used in off-balance-sheet accounting, Schapiro said today during a hearing before the U.S. Senate Agriculture Committee in Washington. “We are talking with FASB about whether we need more disclosure of those,” Schapiro said.

Senator Kent Conrad (D-ND) seems a little more urgent:

“How is it possible that someone is able to bet the farm here, multiple times, and it disappears from the balance sheet because of this repo-to-maturity technique?” asked Senator Kent Conrad, a North Dakota Democrat, noting that the technique made it appear as though the risk had been “sold.”

“That is a loophole so big you can drive a Mack truck through it,” Conrad said. “If that’s not closed, we should ask ourselves what we’re doing.”

I think we all know what a lot of people at the SEC are doing.

MF Global Accounting Technique Under Review, Schapiro Says [BBW]

The Overworked SEC Makes Time To Entertain Teenagers

If there were candy involved in this, it might be considered creepy.

The SEC hosted a shadowing event at its Washington, DC HQ yesterday (what, no invite for AG?) as well as a few regional offices to show high school students interested in finance just how cool the SEC is and how much fun it is to work for a [dot]gov in the business of protecting investors or whatever it is the SEC purports to do these days.


Participating students are involved in the Academy of Finance, one of five career-themed academies that are part of the National Academy Foundation (NAF). More than 250 students are visiting SEC offices this week in Washington, Atlanta, Boston, Denver, Los Angeles, Miami, Philadelphia, Salt Lake City, and San Francisco. The kids will hear from SEC Commissioners Elisse Walter and Troy Paredes and other SEC leaders in group discussions, and are then paired with an SEC professional to observe the workday. SEC staff members from various divisions and offices volunteered to be shadowed and, according to the press release, “are enjoying the opportunity to explain their work and interact with America’s next generation of financial professionals.”

“By shadowing an SEC employee for the day, students can learn about the SEC’s mission on behalf of investors and the work that we do on a daily basis to achieve it,” said Kathy Floyd, a Deputy Director in the SEC’s Office of Investor Education and Advocacy. “We hope to pique the students’ interest as they consider their own potential career paths in the financial services industry or in public service at an agency like the SEC.”

JD Hoye, President of the National Academy Foundation, added, “The National Academy Foundation provides students with experiences that allow them to see the real world applications of what they are learning in school and hone the skills necessary to excel in their careers. Through our partnership with the SEC, students gain a window into an important part of the financial industry, underscoring the relevance of their class work and exposing them to possible career paths.”

The shadowing program helps the SEC meet objectives in Section 342 of the Dodd-Frank Act, which calls for federal financial regulators to seek diversity in their workforce at all levels and, where feasible, to partner with inner-city high schools, girls’ high schools, and high schools with primarily minority populations to establish or enhance financial literacy programs and provide mentoring. Funny, I don’t think any of the dreadlocked teenagers that hang out on my corner are all that interested in finance and accounting beyond the math required to figure out how many 8ths are in an ounce but whatever, good for them.

It’s important to start them young. Way to go, SEC.

Former Deloitte Employee Swings to Settlement with SEC Over Insider Trading Charges

Remember Annabel McClellan? She’s the wife of former Deloitte partner Arnold McClellan who sorta got wrapped up into an insider trading mess with her sister and brother-in-law last fall. Annabel is also a former Deloitte employee who gave up the glamorous life of a Salzberg solider to be a stay-at-home mom. Oh! and she was working on swingers app called My Nookie that was on the verge of taking the scene by storm. The whole insider trading thing put those ambitions on hold due to the fact that Annabel may be looking at some jail time and she settled civil charges with the SEC yesterday for $1 million. The good news for Arnie is that if judge gives the settlement the thumbs-up, he’ll be off the hook who, prosecutors say, had no clue that the Mrs. was engaging in extracurricular activities:

McClellan, who pleaded guilty in April to one count of obstructing the SEC’s investigation, said she overhead her husband talking about the deals and passed the information to her brother-in-law, according to a transcript of her change of plea hearing.[…] McClellan told prosecutors that her husband wasn’t aware of or involved in passing information, according to documents filed in the SEC case.

Of course, if Arnie wasn’t aware that Annabel was trading under his nose, it makes you wonder with whom she was researching Amazon Squat and the Foldover.

Wife of former Deloitte partner to pay $1 million [Bloomberg]

Non-U.S. Survey: IFRS Is Getting More Popular

Global Reporting Standards are gaining popularity among investors and finance executives, according to a new report by ACCA. Around 170 senior executives and investors were questioned. More than 40% said international financial reporting standards improve access to capital, while around 25% believe the global standards have lowered capital costs. ACCA chief executive Helen Brand said: “Growing support amongst CFOs and investors for [IFRS] must be considered carefully” by US regulator the SEC as it debates converging US GAAP with international standards. “We believe a positive answer from the SEC would give a tremendous boost to the cause of financial reporting and more importantly the world economy.” [Accountancy Age, Earlier]

Deloitte All of a Sudden Caught in an Awkward Three-way with SEC, Chinese Regulators

“This is one of the biggest battlegrounds in the transnational regulation of accounting firms,” said Paul Gillis, a visiting professor of accounting at Peking University’s Guanghua School of Management. “Deloitte is between a rock and a hard place. This is a major escalation.” [WSJ, Earlier]

SEC Not Amused By Deloitte’s Failure to Produce Documents Related to Company That Held Their Audit Workpapers Hostage

Remember Longtop Financial Technologies? Deloitte resigned as auditors of the Chinese company back in May after LFT took some actions that were, shall we say, unusual for an audit client. Among them, “interference by certain members of Longtop management in DTT’s audit process; and […] the unlawful detention of DTT’s audit files.” And there may be some financial statement fraud going on, to boot. What’s even slightly weirder is Deloitte’s resignt to Longtop’s Audit Committee that laid out the specifics:

[A]s a result of intervention by the Company’s officials including the Chief Operating Officer, the confirmation process was stopped amid serious and troubling new developments including: calls to banks by the Company asserting that Deloitte was not their auditor; seizure by the Company’s staff of second round bank confirmation documentation on bank premises; threats to stop our staff leaving the Company premises unless they allowed the Company to retain our audit files then on the premises; and then seizure by the Company of certain of our working papers.

Right. The auditors-almost-taken-hostage situation. Quite a doozy, this one. Based on the history between Deloitte and Longtop, one would think that Green Dot would jump at any chance to exact a little revenge on these shady bastards. NOPE!


From the
crack squad at the SEC:

The Securities and Exchange Commission today filed a subpoena enforcement action against Deloitte Touche Tohmatsu CPA Ltd. for failing to produce documents related to the SEC’s investigation into possible fraud by the Shanghai-based public accounting firm’s longtime client Longtop Financial Technologies Limited.

According to the SEC’s application and supporting papers filed in U.S. District Court for the District of Columbia, the SEC issued a subpoena on May 27, 2011, and D&T Shanghai was required to produce documents by July 8, 2011. Although D&T Shanghai is in possession of vast amounts of documents responsive to the subpoena, it has not produced any documents to the SEC to date. As a result, the Commission is unable to gain access to information that is critical to an investigation that has been authorized for the protection of public investors.

“Compliance with an SEC subpoena is not an option, it is a legal obligation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The ability of the SEC to conduct swift and thorough investigations requires that subpoena recipients promptly comply with that legal obligation. Subpoena recipients who refuse to comply should expect serious legal consequences.”

Maybe the email/hand-written letter sent by carrier pigeon (whatever method of communication the Commission is using these days) got lost OR maybe no one at Deloitte Shanghai was in the translating mood that day but it seems slightly strange that Deloitte would just blow this off especially since Longtop screwed them 70 ways to Sunday. Of course these documents could show that Deloitte was really a bunch of pansies and we’re letting LFT run the show until the gross negligence got to the point that they simply couldn’t ignore it anymore. It’s anybody’s guess, really.

UPDATE: The Journal reports that Deloitte claims to be “caught in the middle of conflicting demands by two government regulators,” which could be seen as extremely convenient.

SEC Files Subpoena Enforcement Action Against Deloitte & Touche in Shanghai [SEC]
Court Filing [SEC]
Also see: S.E.C. Asks Court to Force a Release of Papers From China [NYT]

When Booking Bogus Revenue, Ideally Your CFO Is the Type to Not Give a Rat’s Ass

James Li and David Chow used to run a shop called Syntax-Brillian Company as the CEO and Chief Procurement Officer respectively. They sold high-def, LCD TVs under the Olevia brand in China. Problem was, they didn’t really sell TVs under the Olevia brand in China. According to the SEC:

[F]rom at least June 2006 through April 2008, Li and Chow engaged in a complex scheme to overstate Syntax’s financial results by publicly reporting significant sales of LCD televisions in China, when in fact the vast majority of these sales never occurred. Li and Chow initially concealed the scheme through the use of fake shipping and sales documents.

Of course, they couldn’t do it alone. They needed a CFO. A CFO who would backdate things when asked and ignore obvious signs of bogus revenue. That man was Wayne Pratt who, from the sounds of it, wasn’t too concerned about ANYTHING:

The SEC alleges that Wayne Pratt, Syntax’s Chief Financial Officer, ignored red flags of improper revenue recognition and participated in preparing backdated documentation that was provided to Syntax’s auditors to support fictitious fiscal 2006 year-end sales. Pratt also ignored indications of impaired assets, agency sales, and potential collectability issues.

So, budding criminals, get on the look out for a guy/gal who is accustomed to shrugging their shoulders and responding “Meh. Whatever.” to your demands. Should work out well for you.

Litigation Release [SEC]
Complaint [SEC]

Some Are Suggesting That the IASB Is Filled with a Bunch of Spineless Jellyfish

Representatives of large institutional investors told the Securities and Exchange Commission on Thursday that they had serious qualms about the London-based International Accounting Standards Board replacing the U.S. Financial Accounting Standards Board as the primary arbiter of accounting rules in this country.

Speaking at an SEC panel focusing on investor views of international financial reporting standards, the representatives roundly supported the goal of establishing a single set of high-quality global financial reporting standards in the United States in the form of IFRS. But they suggested that the IASB, the current promulgator of IFRS, lacks the backbone and outreach capability of FASB — qualities that would be needed for a global system to succeed. [CFO]

PCAOB, SEC to Be All Up in China’s Business Next Week

Perhaps you’ve heard that some U.S.-listed Chinese companies have had some trouble with their financial reporting. Often times this leads to CFOs quitting, auditors resigning or workpapers being held hostage. None of which are good. Occurrences such as these have been going on for a little while and more recently the SEC admitted that they had, in fact, heard something about it. Perhaps even more surprisingly, a Chinese official also confessed that some of these companies weren’t exactly on top of their shit and in some may not have the faintest idea of what they’re doing.

All this excitement has finally gotten the teams at the SEC and PCAOB worked up enough that it has been decided that they’re popping over to Beijing to meet with the country’s Ministry of Finance and the China Securities Regulatory Commission next Monday and Tuesday to see what’s what.

“This meeting is the commencement of our accelerated efforts with the People’s Republic of China to forge a cooperative resolution to cross-border auditing oversight. I believe we share a common objective with Chinese regulators to protect investors and safeguard audit quality through our mutual cooperation,” said James R. Doty, PCAOB Chairman.

The delegation will be led by Board Member Lewis H. Ferguson and include staff from the PCAOB’s Office of International Affairs and Division of Registration and Inspections, and the SEC Office of International Affairs and Office of the Chief Accountant. The delegation will meet with senior leadership of the Ministry of Finance and the CSRC.

“The purpose of this meeting is to provide an opportunity to exchange information about how each country conducts inspections of auditing firms and to move toward a bilateral agreement providing for joint inspections of China-based auditing firms registered with the PCAOB,” said PCAOB Board Member Ferguson.

Reuters reports that Ferguson considers the trip a “confidence-building exercise,” just in case you were still a little queasy on Sino-Forest, et al.

Statement on Delegation to China [PCAOB]
U.S. audit watchdog, SEC plan Beijing visit [Reuters]

Confidential to Sir David Tweedie: Mary Schapiro Isn’t Hearing Encouraging Words on IFRS

Speaking at The Wall Street Journal’s annual CFO Network meeting in Washington D.C., Schapiro readily admitted that there isn’t a big push from either multinationals or shareholders to move to international financial reporting standards.

In response to a question from Bank of America’s CFO, Chuck Noski, Schapiro said, “We have not heard from a lot of shareholders that we have to go (to IFRS). We’ve heard the contrary… ‘Why would we take this step toward international accounting standards?’” [CFOJ]

Broker-Dealers, Prepare Thyselves for More Intrusive Audits

SEC commissioners will vote today on proposed changes to broker-dealer auditing and reporting rules at a meeting in Washington. As with the 2009 rules, which tightened oversight of advisers’ custody of client assets after Bernard Madoff Ponzi scheme was exposed, the new changes increase oversight of the minority of about 300 broker-dealers who hold customers’ cash.

The proposals — which would be opened for a 60-day comment period — would require that a broker-dealer’s internal controls be checked by a registered public accounting firm and would let regulators examine the broker-dealer’s audits. Broker-dealers would have to file quarterly reports describing whether they have access to client money and how any access is controlled. [Bloomberg]