Category: Uncategorized

The Knighted One Keeps His Promises

Thumbnail image for Thumbnail image for tweedie.jpgSir David Tweedie and his fellow non-knighted wonks have released IFRS 9, Financial Instruments today to much anticipation. For those companies that were chomping at the bit, you can adopt pronto but nothing is mandatory until the end of 2012.
You got to hand it to Tweeds. The BSD at the G20 demanded that the IASB take another look (read: change) at this fair value thing ASAP and he delivered, AS PROMISED:

We have delivered on our commitment to the G20 and stakeholders internationally to provide an improved financial instrument standard for the classification and measurement of financial assets for use in 2009. Benefiting from unprecedented levels of consultation with stakeholders around the world, the IASB has made significant changes in its initial proposals to improve the standard, provide enhanced transparency and respond to stakeholder concerns.

Very impressive, so the ball is your court, Norwalk. You better get off your asses and come up with something good because none of you have knighthood and we haven’t seen much evidence of your re-quadrupled efforts. We already know that you’re talking Plan B but give us something, anything. You’re worried about Congress, sure but the Europeans are making you look bad. Is there any American knight-ish equivalent that Bob Herz could get that would help give him a boost in confidence?
If you’ve got suggestions, leave them in the comments. We’re at a total loss.
IASB completes first phase of financial instruments accounting reform [IASB Press Release]
New fair value standard rushed out by IASB [Accountancy Age]

CFO Article Illustrates Internal Audit Cowardice & CCM Confusion

the-cowardly-lion.jpgEditor’s Note: Robert Stewart is a former Big 4 auditor and ex-Marine who has since served in several executive management roles in both Internal Audit and Corporate Finance. He is also the founder and chief contributor to the online accounting and audit community, The Accounting Nation. Outside of work, he is a husband, father, brother, writdequate aspiring triathlete.
Alright, CFO.com, with your latest contribution you’ve satisfied your requirement to pander to your internal audit constituents. If you put a little more effort into the headline, they might read it too. With an article paraphrase like:

A biotherapy firm’s continuous controls monitoring program, which is essentially run by its internal audit team, is credited with creating numerous (though unquantifiable) benefits

you’ve assured that nobody will read further. Talk about hard hitting journalism. Grabs ya’ right by the goods and begs you to read more…doesn’t it? Well, I did read more. Because I am an idiot. Because I need to get out more. Because I’m an internal audit junkie. And mostly because I just love the apathy directed at internal audit by “real” business people.


This article touts the benefits of implementing a Continuous Controls Monitoring system through the “success” story of Talecris Biotherapeutics, a $1.4 billion provider of injectionable medical treatments.
Here’s what I have to say about some points in the article:
• The quote that exemplifies why there is such apathy toward Internal Audit: “‘We can’t help [management] design controls or tell them that a control is the right one to have in place, but we can help them monitor it,’ states Mary Anne Tourney, IAD at Telecris.” This, of course, is bullshit. YOUR JOB IS TO HELP MANAGEMENT.
Don’t twist the IIA Standards to relinquish one of the tenets of your responsibilities (i.e. to offer “advisory” services to management). Hiding behind the independence argument is cowardice. Maybe if you acted like a member of management, they’d treat you like a member of management (and CFO.com might capitalize your title in its article).
• As for the program’s ownership, Tourney states that management designs the controls, ‘But we control the program in internal audit so the parameters of the tests don’t get changed without our knowledge.’ WTF? Where is your independence argument now? Listen, you can’t just apply the standards when they suit you and bend them when they’re inconvenient.
• Miklos Vasarhelyi, a Rutgers professor, states that quantification of the CCM program’s effectiveness is difficult and it’s “flaky” to do too much quantification. At another point in the article, Talecris declined to comment on how much it has spent on the CCM system.
This illustrates another point that internal audit practitioners need to understand better: it’s not just about having an en vogue system that you can brag to your fellow IA geeks about at the local IIA chapter meeting. It’s about spending the company’s money where you get the greatest return on investment. Calling the act of quantifying the ROI of the system “a bit flaky” illustrates why this guy is a professor instead of a CFO. Shareholders don’t care if you have the Cadillac of internal control systems unless it translates into increased shareholder value. This may not always drive the best behavior but let’s face it, that’s how the game works.
Look, the jury on CCM is still out in my book. Although I believe the foundation is sound, I’m not sure about the relative importance in the web of controls chosen by an organization to mitigate its risk. It is, after all, still a back-end monitoring tool that detects anomalies after they have occurred and I’m inclined to spend more of my money on the preventative controls rather than detective controls.
And to all you Internal Auditors out there, stop being afraid to consult management on their internal controls and make control recommendations. THAT’S. YOUR. JOB. You can’t implement or own the controls, but for god’s sake, share your knowledge to improve the organization. It’s the only way for internal audit to start getting some respect (it’s a good start anyway).

Facing Writs, Ex-Grant Thornton Partner Bolts Hong Kong

A former Grant Thornton partner in Hong Kong is facing two writs from clients that total $12.1 million, according to the Financial Times.

Gabriel Azedo was reported by Grant Thornton Hong Kong*, after the allegations were made, to the HK commercial crime bureau for ‘inappropriate’ conduct.


Of course, when we hear “inappropriate conduct” we automatically imagine something lewd but alas, it’s about money:

Angela Gardner, a Hong Kong resident, is suing Mr Azedo and Senning International, registered in the British Virgin Islands, for breach of contract and breach of trust and demanding $9.8m. Grant Thornton is not mentioned in this suit.

Arthur and Betty da Silva, prominent local racehorse owners, have filed a writ against Mr Azedo and Grant Thornton Hong Kong seeking an account of trust assets allegedly held on their behalf by the defendants.

Mr and Mrs da Silva are demanding the transfer of “all such trust property” to them or restitution of not less than $2.3m.

On October 20, GTI realized that this guy was a liability, reported him to HK Fuzz and promptly terminated their relationship with him. Gabe, “a pillar of the city’s financial establishment”, was on GT’s global leadership board as recently as October 21, although he had not technically been a partner in the firm since 2008.

Oh so mysterious, Mr. Azedo. What were you doing over there in HK? The FT, being the bastions of journalism that they are, tried reaching him for comment but sounds like he’s is on the lam.

Although it doesn’t seem to be much more than a headache for GT — for now — we’re happy to see something out of the firm aside from another visit from the press release elves.

Ex-Grant Thornton partner faces writs [FT]

*Everybody knows that the offices are independent of each other right? The global firm is just something they say. Sort of like “Global Six Accounting Firm”. Which, for the record, was not mentioned once in this article.

CPAs Can Be Heros Too

hero.jpgCPAs clients’ have high expectations. Not only do you have to provide timely, exceptional service, you never know when your client might go off the deep end. And we’re talking your typical, frantic phone call, going off the deep end. We’re dealing with ‘My life is over, I can’t go on’ deep end:

[Barry] Schimel recounted how one of his clients was suicidal, so they spent 10 hours driving around talking about the clients’ problems until he got the client back home and safe. He believes the job of the accountant is to make the client successful and more profitable. “Your role is to turn obstacles into an opportunity for clients,” he said.

Not only does Schimel have clients that are in personal distress, he also has some that got the short end of the stick in the smarts department:

Another client was a trash-hauling company that didn’t know it was being charged extra at the dumping station because its drivers remained inside their trucks while the load was being weighed. Once Schimel’s firm pointed this out, the supervisors soon made sure their drivers got out of their trucks, lightening the scales.

This Schimel guy might be our personal hero. A CPA that literally saves lives and doesn’t rub their clients noses in shit when they do something stupid. Who knew this was even possible? Young CPAs, this is your idol.
How to Be a Hero to Clients [Web CPA Debits & Credits]

Deadline Watch: Porsche Suing Crocs For ‘Cayman’ Use

crocs533.jpgAs we warned last week, today is the filing deadline of 3rd Quarter 10-Qs for accelerated filers. While many of you may be coming down to the 5:30 deadline, just as many have probably hit the button long ago and the filings are now getting scoped.
Michelle Leder over at Footnoted.org has one interesting Q that tells us about the fashion eyesore company Crocs, who is being sued by Porsche in Germany over the use of the name “Cayman”:

Now few people would probably confuse Crocs’ Cayman sandal for the Porsche Cayman. After all, one sells for $29.99 and the other starts at $51,000. And if this had been filed in the United States, instead of in Germany, we’d be even quicker to dismiss it. But at the very least, it’s got to be an expensive distraction for Crocs, which had to find a law firm in Germany to represent its interests. In the filing, Crocs says it plans to “vigorously defend” itself against the claims. But vigorous defenses rarely come cheaply. It’s not clear from the filing whether Crocs has already stopped selling the Caymans in Germany or not.

Crocs has survived plenty of near-death experiences already so we’re not getting our hopes up. Besides, if the First Lady wears them, is there really any hope for rubber shoe extinction?
Porsche vs. Crocs… [Footnoted.org]

Grant Thornton Names a New COO*

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGGrant Thornton named Lou Grabowsky as its new Chief Operating Officer today. Grabs starts his new gig the same day as Stephen Chipman and Ed Nusbaum start in theirs so we’re guessing that will be quite the rager to kick off the decade.
LG takes over the day-to-day responsibilities at GT which no doubt includes overseeing the press release elves:

“Lou’s credentials are impeccable, and he will serve the firm with his characteristic commitment to excellence as Chief Operating Officer for Grant Thornton LLP,” says Stephen Chipman, Grant Thornton LLP CEO-elect. “His personal and professional strengths complement my own, and we have already been working on transition issues and other matters of high priority for the U.S. firm.”

Whoa, Steve-o, feeling ignored? We won’t forget that you’ve got strengths buddy. You didn’t get the big chair for nothing.
Back to the real reason for this little post, Grabs is a graduate of The Pennsylvania State University and an Arthur Andersen survivor. He was even the partner in charge of assurance services for the Dallas office from ’91-’97 so he may have known David Duncan. SCANDAL!
Just joshin’ you Lou. Enjoy the new gig.
Lou Grabowsky named Chief Operating Officer of Grant Thornton LLP [Press Release]
*Managed to only mention ‘Global Six Accounting Firm’ once

Caption Contest Friday: The AICPA Will Convince You to Save Money By Freaking You Out

We don’t know who the hell the AICPA has working in the marketing department but they need to get in touch. We have some questions.
Below is Benjamin Bankes at the New York City Marathon. If you’re not familiar with Ben, he is the spokesswine for the AICPA’s “Feed the Pig” campaign.
We’ve presented three photos for your caption suggestions. See the rest after the jump.
ben bankes at the NYC marathon.jpg


Ben Bankes2.jpg
ben3.jpg
Rules are the same: Submit possible captions for all the photos in the comments. We’ll choose our favorites — with preference given to those with an accounting bent — and then let you vote for the best one.

Irony in the Daily CPA Letter

From a reader:

Here are two headlines, in this order, on CPA Daily Letter this morning. Fannie Mae decides to rent to people that are currently not able to pay their mortgage? Peaked my interest and made me ask the question, “WHAT?” Then, I scrolled down and read the second headline…and then thought…well, yeah…that would be the necessary outcome…time for a new business model anyone?

Picture 2.png
While the reader has a good point (i.e. Fannie Mae is still a giant shitshow and should seriously consider going back to the drawing board) we’re more curious as to who over at the CPA Letter has the sense of humor. Then again, it could be one giant coincidence.

Apparently Accounting Rule Convergence Is Not 100% Total Convergence

Thumbnail image for Thumbnail image for merge.jpgYesterday the FASB and IASB got together and spent 23 pages convincing everyone that convergence of accounting rules will happen by June 2011. If you haven’t been convinced by the steps one paragraph statement that was issued saying how ‘encouraged’ she is about the latest re-re-affirming.
There is no doubt in anyone’s mind that there will be a single set of accounting rules — for the entire financial reporting universe — rolled out and everything will be right with the world in June 2011.


But will it be a single set of standards? Edith Orenstein of FEI Financial Reporting Blog:

It is interesting to note that the FASB-IASB joint statement speaks in some places of converging to a ‘single’ set of standards, and in other places of converging to a ‘common’ set of standards. To some, these terms can mean a world of difference. However, the terms are often used interchangably by many different parties. For example, here are some excerpts from the joint statement:

We are redoubling our efforts to achieve a single set of high quality standards within the context of our respective independent standard-setting processes.
Our goal is to develop together common standards that improve financial reporting in the US and internationally and that foster global comparability. Achieving such improvements is consistent with the objectives of the IASB that are set out in the Constitution of the IASC Foundation. It also fulfils the responsibility the FASB has under US law and the Securities and Exchange Commission’s 2003 Policy Statement to consider, in developing standards, whether international convergence is necessary and appropriate in the public interest and investor protection.

(emphasis original)
That clears it up, doesn’t it? So it’s either a “single set” or “common standards”? FEI Blog thinks it’s a progression, “Presumably, once a set of ‘common standards’ is acheived, the next step would be to officially adopt one set (again, presumably, IFRS, which is used in over 100 countries) as the ‘single’ global standard.”
While this may be the case it still doesn’t mean that everything will be the same.
CFO:

“Convergence doesn’t necessarily mean the same,” says D.J. Gannon, a Deloitte audit partner and the firm’s expert on international financial-reporting standards. In fact, Gannon says, there is no expectation that any of “the lingering differences” between rules that are already converged will be handled through standard-setting. “So the bottom line is that companies [reporting results under U.S. generally accepted accounting principles] are going to have to deal with those differences if they apply international financial-reporting standards at some point in the future.”

Good lord. So for all practical purposes, it sounds like there will still be differences. Frankly, we’re disappointed in this revelation. If someone had told us from the get-go that it wasn’t going to be 100% the same accounting rules we wouldn’t have made such a big stink about the absolute impossibility of the endeavor. Going forward we’ll be taking this even less serious.
FASB, IASB Reaffirm Convergence By June, 2011 [FEI Financial Reporting Blog]
“Convergence Doesn’t Necessarily Mean the Same.” [CFO]