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Silvercorp Metals Asks That You Not Believe Anonymous Letters Alleging Accounting Fraud Just Because They Have Assets in China

As we’ve discussed, companies listed on North American stock exchanges that happen to have ties to China haven’t faired too well. The problem? Some dodgy accounting and disclosures. It’s caused a lot of angst amongst investors and there was enough concern that someone actually decided to wake up the PCAOB and SEC to let them know that something might not quite right over there.

Today’s news that Silvercorp Metals, a Canadian mining company who happens to do some work in China, is the subject of a letter that is making the rounds alleging accounting fraud probably doesn’t come as a surprise to anyone but it sure has irked the hell out of the company.

The allegations against Silvercorp are “entirely bogus,” Lorne Waldman, a Silvercorp spokesman, said today in a telephone interview. “If we didn’t have assets in China this wouldn’t be happening.”

And while they’re at it, the company will have you know that they were not created in a one those so-called reverse mergers that have everyone sketched out.

Waldman denied the mining company was created in a so- called reverse takeover, as was Sino-Forest. He said that Silvercorp’s auditor is Ernst & Young LLP, the same firm that audited Sino-Forest’s financial statements.

Oh, right. Ernst & Young. There’s no cause for concern since they’ve seen this before so they’ll probably just sit tight to see what happens. The silver lining for Silvercorp is that Roddy Boyd has written anything about them. Yet.

Silvercorp Says Accounting-Fraud Allegation in Anonymous Letter Is False [Bloomberg]

Here Are Two Examples of Things Not to Say When You’re at Your Local IRS Office

Let’s open with, “If I don’t see [so and so], I will blow this place up.” That’s a definite no-no. Also to be avoided would be statements such as, “You’re gone. You’re all [redacted but I’m guessing it was “fucking”] gone. You’re gonners.” And yet that’s what 48 year-old Paul Weber did in La Crosse, Wisconsin. What’s especially odd is that Weber didn’t make these statements in immediate succession. He first asked for “Kevin” then made the threat, bolted the office only to return and make the second threat. I guess Weber felt like returning in order to take a stand. Which is more than we can say for the Democrats in Madison.

[via La Crosse Tribune]

Delaware CPA Exam Candidate Isn’t Sure About Audit Hours

Are you a CPA exam candidate desperate for answers with no clue how to find them? Let me do the Googling for you, shoot me a note and I promise I won’t get snippy (my doctor adjusted my dose).

Hello Adrienne,

I do have 99.99% of the education requirements needed to sit for the CPA exam. All but one, I don’t have any auditing credit hours. Am I going to be able to sit for the CPA or should I go back to school and complete this requirement?

Here’s the good news: in some states, you can sit for the exam before you meet all licensure requirements, and in most, that means experience can wait until you have sat for and passed all exam sections. The lengtave to complete these experience requirements varies by state and due to the ever-changing nature of exam requirements, you will want to verify any information I’m about to give you with the state board directly just to be safe. No one’s perfect, especially me. Delaware candidates may contact NASBA’s Delaware coordinator Misun Shin at mshin@nasba.org or (615) 880-4263.

So, once you sit for and pass all four parts of the CPA exam, you’ll need to take the AICPA ethics exam, which you can order directly from them. Don’t trip too hard, it’s self-study meaning open book. AICPA members get it cheaper than non-members so be sure to join first before you buy it.

Assuming you’ve aced those two steps, you can then worry about your experience.

Delaware work experience is based on the degree you hold. If you have a Master’s, you will need 1 year of experience as an employee of a CPA firm or equivalent experience as an accountant in other fields (e.g., government, commerce, industry). Bachelor’s holders must have 2 years of experience and Associates (yes, Delaware allows you to sit for the exam with a 2 year degree) must have 4 years of experience to be licensed to practice as a CPA in that state. You can no longer receive a certificate (non-practicing CPA title) from Delaware as of 2006.

Your other option is to complete your work experience requirement as an owner, principal or employee of a public accounting firm (full-time). Double the numbers above; 2 years for Master’s holders, 4 for Bachelor’s and 8 for an Associate.

Nowhere on the Delaware Board of Accountancy’s site do I see a mention of audit hours.

The Delaware State Society of CPA’s BeaCPA website states:

2 years experience obtained in engagement, resulting in the preparation and issuance of financial statements prepared in accordance with generally accepted accounting principles or other comprehensive bases of accounting as defined in the standards established by the American Institute of Certified Public Accountants

as a requirement for Associate and Bachelor’s holders. Master’s candidates must obtain 1 year experience including any type of service or advice involving the use of accounting, attest, compilation, internal audit, management advisory, financial advisory, tax or consulting skills.

What this says to me is that you don’t actually need audit hours at all unless you plan on doing audits. Delaware would like auditing to be a part of your 21 required accounting units that make up your education requirement but does not require it.

Again, check with the state board just to be 100% sure but it looks like you’re all clear to sit for the exam at this point, no reason to wait until you have the experience.

Good luck and please check in with us to let us know how your exams turn out!

ANR: Investors Begging SEC Not to Switch to IFRS; Undocumented Workers and Tax Credits; KPMG Marking 9/11 with Community Service | 09.02.11

~ Morning, gang. We’ll be doing a half day today, so we suggest you do the same. Have a great three-day weekend and we’ll see you back here on Tuesday.

U.S. Is Set to Sue a Dozen Big Banks Over Mortgages [NYT]
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.

SABMiller Queries Foster’s Financial Statement [Bloomberg]
SABMiller Plc (SAB), which has made a hostile $10 billion bid for Foster’s Group Ltd. (FGL), questioned the Australian brewer’s statements on its financial performance and net debt in a submission to the country’s Takeover Panel. The Australian government agency received the application from SABMiller, according to a statement on the panel’s website. A panel hasn’t been appointed and no decision has been made to conduct proceedings, the government agency said. SABMiller argues there is “no reasonable basis for several forward-looking statements” in Foster’s fiscal 2011 results presentation, according to the statement. The world’s second- largest brewer by volume sought an order that Foster’s clarify “misleading and deceptive” remarks.

Investors to SEC: Please Don’t Switch to IFRS [CFOJ]
When SEC Chairman Mary Schapiro said in June that investors aren’t clamoring for International Financial Reporting Standards, she may have been understating things… a bit. Now, some of the biggest U.S. investor groups are letting the SEC know in no uncertain terms that it should postpone its decision on IFRS and even stop the convergence process between U.S. GAAP and IFRS.

Boeing’s Tax Assets Could Trump Liabilities for Years [CFOJ]
In total, the company has tax liabilities of roughly $10.7 billion. That’s compared to $14.4 billion in deferred tax benefits, which means it ultimately won’t pay anything to the IRS unless the value of those assets erode.

U.S. Showed No Job Growth in August; Rate Stays at 9.1% [NYT]
The net addition of no jobs in the month was down sharply from a revised 85,000 gain of jobs in July, the Labor Department said Friday, and was far below a consensus forecast by economists of 60,000. The unemployment rate stayed constant at 9.1 percent in August.

Undocumented workers got billions from IRS in tax credits, audit finds [WaPo]
The Internal Revenue Service allowed undocumented workers to collect $4.2 billion in refundable tax credits last year, a new audit says, almost quadruple the sum five years ago. Although undocumented workers are not eligible for federal benefits, the report released Thursday by the Treasury Inspector General for Tax Administration concludes that federal law is ambiguous on whether these workers qualify for a tax break based on earned income called the additional child tax credit.

D.C. Circuit: ‘The IRS is Not Special’ [TaxProf]
I won’t have it!


Salesforce Chief Calls Accounting Criticisms “Ludicrious” [SFC]
In fact, [Mark Benioff] says, Salesforce set the standard for other software-as-a-service companies that came after it.

KPMG Announces Nationwide Community Service Campaign at More Than 200 Non-Profits to Mark 9/11 Anniversary [KPMG]
As part of the “Service in Remembrance” campaign, taking place from September 6-11, thousands of KPMG partners and employees will volunteer at more than 200 non-profits across the country. “We look forward to being a part of something extraordinary, as the KPMG family proudly joins millions of Americans in support of the National Day of Service,” said KPMG LLP Chairman and CEO John Veihmeyer.

How Should an Academic Zero to Hero Approach Recruiting Season?

Ed. note: Have a question for the career advice brain trust? Email us at advice@goingconcern.com.

Going Concern,

I’ve been worrying about this for so long, I’m hoping some people in the profession can shed some light on my fears. When I was 18, I was an idiot. I attended a school far away and I literally never attended class. I also never dropped any classes. Needless to say, I flunked out with many Fs on my transcript (almost a full year’s worth). Later on, I went to a community college and remained an idiot. I did the same thing. My GPA was ~0.9.

Fast forward a few years in a new location, and things are a different story. I went to a community college down here and after screwing up yet again in the first term, I had a 4.0 GPA for the remaining 18 classes. I matriculated to a 4 year school (automatic admission in Florida for AA graduates) and continued. My last 64 credits have been straight As, and I have taken some of the hardest accounting classes – including Cost and two Theories.

I am absolutely dreading recruiting. My institution tells me that my “real” GPA consists of the grades I’ve earned at the school – which would make my GPA a 4.0. However, my transcript is going to have my overall GPA of 2.6 on it. To make matters worse, my actual coursework from the newer community college won’t be on the transcript so they won’t even notice much of an admirable grade trend.

I am also not a member of Beta Alpha Psi. To be an accounting major at my school, you need a 3.0 GPA – I was ineligible my first semester. Since I did not have an accounting GPA before last week, I have to submit my application in the next few weeks. I hope their admissions process isn’t so slow that I miss out on any of their opportunities. OCR is next month.

I know this is a scattered story that very few people can relate to. I don’t know what happened in those years and can’t understand it either. If anyone has some direction for me I would be extremely grateful.

Thank you and I love the site. It’s easily my favorite place for shameless mental masturbation when I’m feeling anxious.

– Zero to Hero

Dear Z to H:

Whatever you did to break out of the unfortunate streak of bottom feeding failures in the classroom and get yourself up to a 4.0-GPA-earning level, please tell me. I would like to make it, bottle it, and sell it to the masses.

The way that your college calculates “real” GPAs is standard for the industry; realize that this is absolutely to your advantage. The 4.0 you are currently carrying should be reflected on your résumé. Also on your résumé should be the time you spent at the community college. The time there launched you to where you are now.

Do not be afraid to approach recruiters. That said, I recommend talking to every firm regardless of size. Some might be turned off by your unconventional path to Dean’s List. Be prepared to be honest with the recruiters about your first attempt at college and the years you took off and when you began to right the ship. Honesty is absolutely the best approach here, because come offer time you will need to provide a transcript of your academic history. You want the transcript to be confirmation of your story, not the bombshell. Good luck.

Grover Norquist Has a Suggestion for President Obama Since He Insists on Giving His Jobs Speech (aka “Campaign Event”) at the U.S. Capitol

“People who use public facilities for private purposes pay an appropriate rental fee so that taxpayers are not subsidizing a private event. The Library of Congress and the Smithsonian museums regularly rent out space for private functions. Perhaps they could suggest to the President and his campaign a reasonable price for use of the U.S. Capitol and the House chamber as a backdrop for his upcoming political rally.” [ATR]

Ernst & Young Aware of This Sino-Forest Situation, Seems Content to Watch It Play Out

Jonathan Weil has a column today on the train wreck that is Sino-Forest, the Chinese-Canadian timber company. In case you need caught up, there have been some questions about the company’s ability to report accurate disclosures and accounting. This led the research firm Muddy Waters to issue a not-so-flattering analysis of the company. Things like “Ponzi scheme” and “investing for the 23rd Century” don’t exactly get people jumping up and down for your company. Ask John Paulson.

Of course Sino-Forest didn’t do this all by themselves. They had credit rating agencies and auditors telling them everything was hunky dory for years and that’s Weil’s point. He reports that Fitch pulled its rating on S-F back in July and S&P finally pulled their rating this week. That just leaves Moody’s but guess who else is still hanging in there? Ernst & Young, baby! They’re still standing behind their audit opinions and showing no sign of budging. And JW is really curious to know who’s going to jump out of this tree first.

One question lingers: Which of the company’s paid opinion merchants will be the last to step aside? Will it be a credit rater? Or will it be the company’s auditor, Ernst & Young LLP in Toronto, which has yet to rescind any of its reports on Sino-Forest’s finances?

So far Ernst looks like the favorite, with only one rating company left in the hunt. Think of it as a contest between giant tortoises to see which one is slower. This time-honored ritual — of market gatekeepers waiting to blow the whistle until long after a scam has been exposed — has become so familiar, we might as well revel in the spectacle.

So these “gatekeepers” Weil speaks of – obviously this includes the Big 4. And it’s true that we’re all used to them waving their arms, screaming “DANGER!” in front of the burning heap that everyone has been aware of for ages (I didn’t say Lehman Brothers. Did you say Lehman Brothers? Who said Lehman Brothers?).

ANYWAY, E&Y should know that they have choices:

Ernst does have options, aside from bracing for the inevitable years of litigation and investigations. It could resign, explain why it is doing so and face criticism for acting too late. It could withdraw its previous audit opinions. It could insist to Sino-Forest’s directors that it be permitted to answer questions from the public about the work it has performed, as a condition of remaining onboard. Or it could hang on in silence, as it’s doing now, and watch its reputation endure more damage.

Could be that this is just another part of E&Y’s strategy. Sit tight while things play out, wait until things get really serious (i.e. bankruptcy, severe economic turmoil, civil charges, etc. etc.) and then come out swinging.

Tree Falls on Sino-Forest, Auditor Can’t Hear It [Bloomberg]

PwC Announces New Categories for Distinguished, Typical, Downright Piss Poor Performance

As you may have noticed, PwC has really gone on the offensive when it comes to making changes to their compensation structure. We broke all the details for you earlier this year and one reader even shared a little spreadsheet analysis for anyone who’s into that sort of thing. More recently, we reported the (unconfirmed) details of the new Senior Associate Milestone Award which includes a getaway to the Terreana Resof is swell but there are few new details that we were recently made aware of that we’ll share with you today. First off, performance categories have changed. A tipster passed along the new buckets that you’ll be fighting to get into in FY12 and who will and will not be eligible for bonus comp:

– New performance categories are “top performer,” “outstanding performer,” “high performer,” “needs improvement,” and “unsatisfactory”

– Bonus eligble for high performer or greater. Bonus levels set by Line of Service. Line of Service will provide specific details about the business performance measures, as well as target bonus ranges for staff level and ratings.

So TP/OP/HP is what you’re all shooting for if bonuses are of interest to you. Conventional wisdom would indicate that most of you will probably fall into the unexceptional “high performer” bucket and that still gets you in the money so it’s really just the rubes that are “Needs Improvement” and “Unsatisfactory” that will be bitching about how cruel and unfair life is.

It wasn’t all business, however, Bob Moritz shared his gratitude for all your ass-busting in the past year, the ass-busting going on as we speak and the ass-busting to come:

Your role in our success
Thanks to all your efforts to deliver quality, value and the PwC Experience to our clients and stakeholders, we had a very strong FY11 and we’re off to a very positive FY12. On behalf of all the partners, I want to thank you for your role in our firm’s success.

I recorded a short video to express my appreciation and talk about the continued investments we are making in you and your career success. We began making changes back in May, including introducing new career milestone awards and increasing transparency around compensation, all designed to demonstrate the value of your career at PwC — both financially and developmentally.

Now we are bringing even more clarity to the compensation conversation with enhancements to the Annual Performance Bonus Plan. These include greater predictability in your year-end bonus opportunity and quarterly updates about how your line of service is performing against its annual business targets. Watch my video and visit the Rewards and Recognition microsite to learn more. You will hear more specifics from your line of service in the coming weeks.

These changes are all based on what you’ve said is important to you. And we will continue to listen. Keep in mind, however, that the full value of your PwC career comes directly from what you put into it. The more you take ownership of your career….solicit feedback to improve your performance….utilize your success plan to take advantage of the many opportunities here to enhance your skills and develop your talents, the greater your ability to achieve your goals and grow your career with PwC.

Ultimately, the better you are, the better we do, and the greater our ability to continue to invest in you. Thanks again for your role in our success!

So, P. Dubbersteins – do you feel that there’s “more clarity to the compensation conversation”? It’s definitely clear that most people will still get bonuses, so that’s a good thing but it remains to be seen what actually comes out of all these changes. Discuss.

Former Payroll Manager for San Francisco Giants Suspected of Embezzlement After Taking a Little Too Much Credit for Team’s Success

A lot of work goes into building a championship baseball team. Good pitching, solid defense and, contrary to some people’s opinion, pinstripes seem to help. What many people easily forget is that there is more to it than just talent on the field. There’s the business aspect of baseball that is essential to every successful team. You can’t just throw a bunch of money around and hope for the best, Steinbrenners. There has to be a plan. The San Francisco Giants, the reigning champs, are one of those teams. Unfortunately for the Giants, they are not impervious to bad luck. Case in point – Robin O’Connor, a former payroll manager for the team, has recently been accused of embezzling more than $1.5 million from the organization. The team was not aware that this misappropriation was happening until someone at Bank of America (Yes.) rang them up with news of a letter they received from Ms. O’Connor, who had recently applied for a home loan and had written a letter explaining two very large deposits into her bank account. Apparently, someone at BofA found the following a little bit out of the ordinary:

“Because of her outstanding contributions to our Major League Baseball team and front office during the 2010 season that assisted us in accomplishing our goal of winning the 2010 World Series, she was given two additional payments of compensation in May 2011,” the letter, quoted in the affidavit, states.

Yes, the correct calculation of federal, state, social security, medicare and other miscellaneous deductions were of such magnitude that it warranted not one but TWO bonuses for Ms. O’Connor. Because if no one gets paid, no one is happy. And unhappy players don’t perform.

Ex-employee may have taken $1.5M [ESPN]

ANR: Is Accounting Transparency Always a Good Thing?; AICPA Asks IRS for Extension After Irene; Parmalat Suit Dies Another Death | 09.01.11

Obama Moves Jobs Speech After Skirmish With Boehner [NYT]
In a surreal volley of letters, each released to the news media as soon as it was sent, Mr. Boehner rejected a request from the president to address a joint session of Congress next Wednesday at 8 p.m. — the same night that a Republican presidential debate is scheduled. In an extraordinary turn, the House speaker fired back his own letter to the president saying, in a word, no. Might the president be able to reschedule for the following night, Sept. 8? For several hours, the day turned into a very public game of chicken. By late Wednesday night, though, the White House issued a statement say Obama “is focused on the urgent need to create jobs and grow our economy,” he “welcomes the opportunity to address a joint session of Congress on Thursday, Sept. 8.”

More Accounting Transparency May Distort Markets [Bloomberg]
In the post-crisis regulatory environment, companies are under pressure to disclose more. The Financial Accounting Standards Board and the International Accounting Standards Board have been trying to improve both U.S. Generally Accepted Accounting Principles and the International Financial Reporting Standards, and make the two sets of accounting rules fully compatible. The goal is to produce a single set of international conventions that achieve a high degree of reporting transparency. The benefits of more transparent reporting seem obvious: Companies with a high degree of disclosure would allow outsiders to exercise better market discipline, which, in turn, would improve resource allocation in the economy. However, the view that greater transparency enhances market discipline and therefore economic efficiency holds true only in a “Robinson Crusoe” economy, that is to say one in which a single decision maker is learning about a company whose decisions are taken as given and whose future cash flows or economic fundamentals are therefore fixed.

Natural Disasters and Your Taxes [Smart Money]
Apparently there’s a bit of flooding going on.

AICPA Asks IRS to Extend Tax Deadline after Hurricane [AT]
“Many of our members are currently actively engaged in preparation of corporate, pass-through entity and trust tax returns with extended filing deadlines of September 15, 2011,” wrote AICPA Tax Executive Committee chair Patricia Thompson in a letter Tuesday to IRS Commissioner Doug Shulman. “The provision of these services has been drastically affected by the aftermath of Hurricane Irene. We are hearing reports of members who have limited Internet connectivity and power outages, both at their offices and at their personal residences. Our members have experienced massive transportation disruptions and flooding of their residences and offices. Also we have heard from members who are having difficulty communicating with their taxpayer clients who are located in the affected areas, including difficulty obtaining information necessary to prepare the return.”


U.S. Self-Employed Struggle to See Opportunities [Bloomberg]
More than 1 million self-employed Americans are no longer in business almost four years after the last recession began, as the economy constrains entrepreneurial activity and small-business job creation. The 18-month contraction that started in December 2007 initially resulted in more would-be business owners, as the number of people who work for themselves grew to 16.3 million in July 2008 from 15.7 million at the end of 2007, according to data from the Bureau of Labor Statistics. Since then, the total has fallen about 10 percent to 14.7 million in July, the data show.

Parmalat Judge in U.S. Reaffirms Ruling to Dismiss Grant Thornton Cases [Bloomberg]
A U.S. judge reaffirmed his ruling to take jurisdiction over two suits by Parmalat SpA (PLT) against accounting firm Grant Thornton LLP, which he later dismissed. U.S. District Judge Lewis Kaplan in Manhattan today ruled that he was correct in taking the two cases, which were originally filed by Parmalat and its Parmalat Capital Finance Ltd. unit in Illinois state court in 2004 and 2005. Kaplan dismissed the suits in 2009.

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]