Okay, so large accounting firms don’t have the best reputations. They also have the tendency to be thick as thieves when they come under scrutiny. And the green eyeshade look has never been one that screams trustworthy.
But now, in what might be a bit of presumptuous awesomeness, the BBC is coming right out and calling Grant Thornton’s Growth Securities Ownership Plan (GSOP) a scheme. Maybe we’re jumping to conclusions but the subtitle doesn’t strike us as being subtle: “A big accountancy firm has denied that it has been peddling a tax avoidance scheme to help rich people avoid paying the new 50% income tax rate from 2010.“
Let’s break some of the key words and phrases down:
Peddling: Use of this word basically implies that narcotics are involved
Tax Avoidance Scheme: Implies a conspiracy of smart people to screw the tax authority on behalf of…
Rich People: Not the best time in history to be lumped into this particular demographic
WTG, G to the T. Not only are you trying to screw the taxing authority in Britain by virtue of the equivalent of slinging financial smack, you’ve got the audacity to do it on the behalf of rich people.
Accountants deny ‘new tax dodge’ [BBC]
Category: Uncategorized
Latvian Bankers Figure That Your Immortal Soul Will Work as Collateral
Latvian bankers apparently have some super-cosmic powers that have yet to be harnessed by others in the finance industry because they are taking peoples’ souls as collateral.
Call us skeptical but Latvian bankers would be the last members of the banking community to be the recipients of a Mortal Kombat-esque finishing move that would be reaped upon borrowers that turn out to be deadbeats.
If Matt Taibbi is to believed (and why wouldn’t he? He works at Rolling Stone after all), then this practice is obviously something that Goldman Sachs has already considered and Blankfein and Co. have utimately decided that bringing hellish powers to earth will just have to wait.
Would you pledge your soul as loan collateral? [Reuters via FT Alphaville]
Heelys Dumped Deloitte for that Slut, Grant Thornton
We told you earlier about wheeled shoes company Heelys dumping Deloitte. It was reported that Heelys left because fees were too high but we speculated that the Big D probably wasn’t down with Heelys request to have the entire audit team don the juvenile wheeled shoes.
Heelys has now announced they will be retaining the younger, sexier, less Big 4-ier, firm Grant Thornton as its independent accounting firm.
We find this very similar to the all-too-common situation where the old wife/husband is left behind for the newer, younger, partner who’s young, racy, and willing to experiment a little.
As you might expect, for accounting firms, letting the engagement teams wear shoes with wheels on them definitely qualifies as racy and risque and other firms only wish they had the balls to do something like that.
Heelys hires new accounting firm [WFAA.com]
Not To Worry California! Ken Lewis is Here!
In the spirit of the recessionary season, Bank of America, being no stranger to asking for assistance, has said that it will accept California’s IOU’s.
Here is BofA’s statement, courtesy of FT Alphaville:
Bank of America Announces Limited Acceptance of California State-Issued Registered Warrants for Customers and Clients
SAN FRANCISCO, July 1 /PRNewswire/ — Bank of America today issued the following statement regarding its decision to accept California state-issued registered warrants:
“Bank of America recognizes the State of California budget crisis will impact our clients and customers. To support our customers, while giving the state legislature additional time to pass a budget, we will accept California state-registered warrants – or IOUs – from existing customers and clients. Based on state disbursement estimates, we will accept the registered warrants through July 10.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b )
“As always, we will work with customers who are impacted by the state budget issues on a case-by-case basis to address their short-term needs using our existing products and services.”
An interest rate has not been announced but Ken Lewis is most certainly pulling for something in the nabe of one case of bourbon per $1 million.
BofA to accept Cali IOUs [FT Alphaville]
Why Do the FASB and IASB Always Insist on Mission Impossible?
Can anyone explain why accounting regulators have the annoying tendency to see a HUGE problem and insist on fixing it when the logistics are seemingly impossible to overcome? It’s commendable to try and solve big problems but it seems that the geeky egos of accountants often get in the way of reality.
CFO.com has a story about the FASB and IASB’s “dream” to get accounting standards down to one model for revenue recognition. ONE!
According to the article, the FASB’s revenue recognition rules are currently spread among 100 standards, so obviously there’s room for improvement but shrinking all that down to one model? Talk about herding cats.
We’re not hating on the standard setters (well, let’s face it, maybe a little) for considering this task but these dweebs can’t even get on the same page re: convergence timing so we’ll be taking the overs on the number of years when this single model pipe dream actually gets off the ground.
Revenue Recognition: Will a Single Model Fly? [CFO.com]
Stanford CFO to Plead Guilty After Pleading Not Guilty
This after speculation earlier about whether Davis would flip. Looks like he’s going to sing:
James Davis, the former chief financial officer of Stanford Financial Group and who is facing charges related to an alleged $7bn fraud at the group, intends to plead guilty to the three charges against him, his attorney told the Financial Times.
Attorney David Finn, who is representing only Mr Davis, told the FT there would likely be a “procedural not guilty plea” entered at his arraignment, but that his client would ultimately plead guilty to the charges against him “once all the details are worked out.” Mr Davis is due to appear in court in Houston on July 13.
You got that ticket to hell stamped, Stan?
Stanford CFO James Davis “intends to plead guilty”, laywer [sic] says [FT Alphaville]
SEC Still Stonewalling, Considering Slowing Down the PCAOB Even More
The SEC gave Congress a little tease about what happened at the Commission re: totally missing the boat on this Madoff thing. But then again, not really.
Inspector General David Kotz made recommendations about ways that the Commission could improve its oversight over the financial industry because, obv, it had nothing to do with the fact that no one there had the background to detect classic Ponzi schemes.
Some recommendations that Kotz made included giving the PCAOB more oversight including jurisdiction over accounting firms that audit investment advisors and broker-dealers. That’s just what the PCAOB needs, more on its docket because it gets things done so quickly.
Kotz would also like to see an amendment to the Securities Act of 1940 that would require investment managers, including hedge funds, to place their securities with custodians that are registered with a national exchange. Kotz claims that this would prevent investment advisers from fraudulently using the proceeds received from new investors to pay old investors (a la Ponzi).
That’s all fine and dandy but Rep. Paul Kanjorski, of Pennsylvania has been asking for details on the Madoff ball dropping for the last two weeks and the Commission has been stalling. Kotz could only state that the Commission is “proceeding ‘in an expeditious manner.'”
Translation: We don’t have any idea how we missed the biggest Ponzi scheme in history.
Best we can expect, Kotz says, is that the report to be issued by the end of August. Which might be enough time to get Kanjorski involved in a sex scandal and maybe this will all just go away for the Commission.
S.E.C. Previews Its Madoff Report [DealBook/NYT]
Deloitte Throws Up its Hands Regarding Missing Gold
The Royal Canadian Mint (RCM) had a discrepancy between their book inventory of precious metals and the actual count, so natch, they called in a Big 4 accounting firm to do an audit and get to the bottom of this.
Deloitte got the honor of investigating and…wait for it…determined that there is gold missing. 17,500 ounces to be precise, worth about 15.3 million Canadian Dollars (approximately $13.2 USD). Oh, and there’s probably some silver missing too.
In classic auditor fashion, Big D issued a recommendation to the RCM to review its security.
Audit fails to find missing gold [BBC]
Oliver Stone Movie on Goldman Sachs to be Coming This Fall
Because we love ourselves a good cat fight, we feel obligated to tell you about the current scratch and screech fest currently going on between Goldman Sachs and Matt Taibbi, a contributing editor at Rolling Stone. Taibbi wrote a less than flattering article on Goldman in Rolling Stone’s latest issue (which is not available online. Read: Lame).
Why, do you ask, would Goldman waste their time on an article in a formerly renown, now ridiculously corporate magazine? For starters, Taibbi describes GS this way, “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity.”
Not a lot of room for subjective interpretation there. Quoting a response from a Goldman spokesman via the New York Post, “The bank’s spokesman, Lucas Van Praag, [said]: ‘[Taibbi’s] story is an hysterical compilation of conspiracy theories,’ he wrote in an e-mail. ‘Notable ones missing are Goldman Sachs as the third shooter [in John F. Kennedy’s assassination] and faking the first lunar landing.'”
We admit, on one hand, that Taibbi might be a tad on the nutty side but the mere fact that Goldman is acknowledging the article with any kind of response puts us in the strangely curious camp.
Goldman Gotcha [New York Post]
BDO, Looking to Spread Out Some Liability, Admits New Partners
As you probably know, BDO Seidman is having a rough year. Tax shelter prosecutions and trials for the International Global Coordination firm that now falls on the U.S. make for some big liability exposure.
The obvious solution to this conundrum? Spreading the love!
BDO Seidman, LLP, is pleased to announce that 10 new partners have been admitted to the partnership, effective July 1, 2009. Five of the new partners are in the tax practice, four are in the assurance business line and one is in BDO Consulting. BDO Seidman, LLP is a leading national professional services firm providing assurance, tax, financial advisory and consulting services to private and publicly traded businesses.”I am very proud to welcome each of these very deserving individuals to our partnership,” said Jack Weisbaum, CEO of BDO Seidman. “The key to maintaining momentum in our profession is a commitment to recruiting, training and retaining superior client service professionals. Each of these new partners is an example of our commitment to human capital development.”
What are the chances that these new partners are some of the most hated people in the firm? C’mon, $520 million judgment hanging out there, the bigwigs have to be thinking, “well, as long as we’re screwed, we may as well stick it to some people within the firm we don’t like.”
Congrats to the new partners!
BDO Seidman, LLP, Admits 10 New Partners [BDO Seidman Press Release]
SEC Rule Would Crack Down on Celebrity Board Members
Now that the SEC has got this Ponzi thing under control, it can focus on more important matters like getting famous people off companies’ board of directors because, you know, they don’t really know shit about the companies they serve.
Perfect example: Tommy Franks, former commander of forces in Iraq, who resigned his seat on Bank of America’s board last week, was on the audit committee. The AUDIT COMMITTEE.
That’s actually not even the best example. According to Bloomberg, everyone’s favorite acquitted killer, O.J. Simpson was on the audit committee of Infinity Broadcasting Corporation before he was charged with murder in 1994. O.J. Simpson. Audit committee. Yes.
We could go on to tell you about Lance Armstrong missing 11 board meetings but still getting paid over $70,000 by Morgans Hotel Group or Gerald Ford sitting on the Board of Traveler’s Insurance (owned by Citi) until he was 85 years old but you get the picture.
This is your SEC, citizens of America, getting their shit together since 1934.
Armstrong, ‘Celebrity’ Directors Targeted in SEC Rule [Bloomberg]
Score One for U.S. GAAP
U.S. GAAP just got a little boost in its image versus its sexy rival, IFRS, courtesy of Audit Integrity, a research services firm.
Audit Integrity studied filings by European companies from 2001 to 2008, looking at filings both pre and post IFRS adoption. The objectives were, “to determine whether IFRS has been implemented consistently across Europe, whether it has resulted in a common method of reporting financial data, and how the depth and comparability of data under IFRS compares to U.S. GAAP.”
At first glance, one might think that with all the bashing of U.S. GAAP in recent years that this was IFRS chance to prove once and for all that it was the new cock of the walk.
Well, not so fast GAAP haters:
“Based on our analysis, we are not seeing a significant improvement in financial reporting when companies shift to IFRS,” said Jack Zwingli, CEO of Audit Integrity. “We found that IFRS is a common standard, but there are significant variances in IFRS reporting, in the completeness of information, the timeliness and the filing frequency.”
Sounds like IFRS ain’t all that does it? You want more?
The firm says overall there are indications that financial reporting is more consistent and more comparable under IFRS than before IFRS adoption in Europe, but it’s not clear that IFRS represents an improvement over U.S. GAAP. In fact, the firm’s report says GAAP filers may have an edge over IFRS filing in terms of the timeliness, depth and breadth of financial data provided to investors.
Ouch, IASB. You want the best part? The Europeans disclose less on executive compensation than we do here in America. You’re all familiar with how popular corporate executives are. To wit:
[Jack] Zwingli [Audit Integrity CEO] said he was also surprised that the analysis revealed IFRS generally provides less information about executive compensation. “It’s not good in the United States, but it’s better than it is in Europe,” he said. “There is more consistency in reporting and deeper coverage of data under GAAP than under IFRS.”
Seems like IFRS has got work to do…IASB, you can call us when you want to get serious.
Study Pokes Holes in IFRS Reporting Quality, Consistency [Accounting & Auditing Update/Compliance Week]