September 25, 2022

Friday Footnotes: 43% Plan to Quit; Earf Day and ESG; Deloitte Director Stole $3m to Flex | 4.22.22

a dog in grass

Ed. note: Happy belated 420 Earth Day, everyone! In honor of the one day a year we recognize the detrimental impact humans have on our home rock, we’re including a couple relevant links on performative environmentalism as it relates to the accounting industry and financial reporting below.

Firms and audit committees focus on ESG for Earth Day [Accounting Today] “Today investors representing literally tens of trillions of dollars support climate risk disclosure,” said SEC chair Gary Gensler during a webinar last week hosted by the sustainability investing group Ceres. “Why is that? It’s because investors recognize that climate change can pose significant financial risk to companies, and investors need reliable information about those risks to make informed investment decisions.”

Billionaire Carl Icahn Calls Out Wall Street ESG ‘Hypocrisy’ in McDonald’s Fight [Bloomberg] Billionaire activist investor Carl Icahn said Wall Street’s ESG efforts may be the “biggest hypocrisy of our time” with firms cashing in on the investing strategy without concern for actual societal impacts.

ESG disclosure regulations aren’t a bluff to be called [The Hill Opinion] Contention aside, climate risk will continue to have a momentous impact on capital markets. While the accelerating trend for more accurate and transparent corporate sustainability disclosures have been largely — to date — driven by the investor community and stakeholders, there are several baseline truths accompanying the SEC’s proposal that will impact the road ahead regardless of which side of the climate spectrum one may lean toward.

Thought tax season was over? Now it’s time to catch up on berating potential clients.

Employee influence grows: 43% set to quit jobs for better pay, career opportunities and flexibility [Cision] Probably not the results EY was hoping for from their own survey: Employees around the world now hold more sway in the global job market, with two-fifths (43%) of respondents saying they are likely to quit in the next 12 months – driven mostly by a desire for higher total pay, better career opportunities and flexibility amid rising inflation, a shrinking labor market and an increase in jobs offering flexible working – according to the EY 2022 Work Reimagined Survey. The survey – one of the largest of its kind – canvassed the views of more than 1,500 business leaders and more than 17,000 employees across 22 countries and 26 industry sectors. It shows that, as many countries emerge from the COVID-19 pandemic, employees have gained significant influence over their employers and that their “wish list” from potential employers is changing.

Audit quality indicators show importance of tone at the top [Journal of Accountancy] Tone at the top and appropriate deployment of personnel are among the most important indicators of a quality audit, according to a survey of CPA firms performed by the AICPA. The Practice Monitoring of the Future Task Force polled the firms to determine which factors they believe are most critical to a high-quality audit. By analyzing these audit quality indicators and sharing them across the profession, the task force is working to continue to improve the quality of audits as firms implement these best practices and procedures.

Former Domino’s Pizza Accountant to Pay Nearly $2 Million Penalty for Insider Trading [SEC] The SEC’s complaint, filed April 13, 2022 in the U.S. District Court for the Eastern District of Michigan, alleged that Bernard L. Compton used confidential financial data he obtained through his role as an accountant at the corporate office of Domino’s to trade ahead of 12 of the company’s earnings announcements between 2015 and 2020. The SEC further alleged that Compton spread these trades across seven different brokerage accounts belonging to himself and various members of his family, which led to illicit profits of more than $960,000.

Biden, accountant hit with IRS whistleblower claim that prez owes at least $127K [New York Post] President Biden and his accountant are facing new IRS whistleblower complaints alleging that Biden owes at least $127,000 in back taxes. The complaints were filed by Chris Jacobs, a former Republican aide on Capitol Hill, to coincide with Monday’s federal tax filing deadline. “Federal agencies must implement laws on a non-partisan basis,” Jacobs told The Post. “The fact that the IRS did not audit Joe Biden’s 2017 through 2019 returns, despite several articles publicly raising questions about the propriety of his actions, raises questions about how the IRS administers our nation’s tax laws, and whether political considerations played a role in the IRS’ decisions.”

These accounting homework questions on Reddit are getting out of hand:

Deloitte director accused of embezzling $3m to fund luxury lifestyle [Australian Financial Review] According to Deloitte’s submissions, former restructuring director Paul Quill claimed work expenses from Deloitte for transactions made on his work credit card, which were in reality personal costs including the purchase of “fine art and luxury goods”. He then allegedly submitted sham invoices to the firm by manipulating genuine invoices from third-party suppliers to look like they were for work-related expenses, backing some up with fake emails claiming to be from a Deloitte partner.

Crypto platform investors sue SPAC execs over accounting [Reuters] Shareholders in cryptocurrency platform Bakkt Holdings Inc sued the investment managers who took the company public via a blank check company, alleging they misled investors by improperly classifying shares. The lawsuit alleges directors and officers at the SPAC, VPC Impact Acquisition Holdings, concealed defective financial controls that caused shares to be misclassified and resulted in Bakkt restating its financials in November.

Deloitte, partner fined and sanctioned over Mitie audit [Reuters] Deloitte and audit partner John Charlton admitted to breaching requirements relating to their audit of Mitie’s impairment testing of goodwill in the healthcare division, which led to a material uncorrected misstatement in the full-year 2016 results, the FRC said. The FRC noted, however, that there was no suggestion that breaches were intentional, dishonest or reckless, and said they had received no financial benefit.

Post-pandemic, KPMG CEO stresses staff communication, feedback [Accounting Today] *Frasier Crane voice*: Go ahead, I’m listening.

Adler Says Vindicated By Audit Showing Murky Fees, Opaque Values [Bloomberg] Other findings include a 411.8 million-euro difference between KPMG’s assessed market value for a sample portfolio of Adler’s development projects and the higher figure the company’s appraisers had provided. Kirsten said the discrepancy is among some of the points where Adler and KPMG disagree, and that different valuations on projects aren’t uncommon. “The worst-case fears on Adler have been cleared today by the KPMG report,” said Mark Benbow, a portfolio manager at Aegon who holds Adler bonds. “The company themselves acknowledge that governance is weak and there are measures that need to be taken but crucially there is no fraud”

Why PwC’s staff pay bands are so broad and overlapping [Australian Financial Review] PwC Australia’s projected pay bands for the next financial year are broad and overlapping due to outlier employees earning well above the norm within each of the firm’s four businesses. PwC last week disclosed projected pay ranges for staff for the 2023 financial year, an unprecedented move for the advisory sector that is yet to be matched by any of the firm’s consulting rivals.

China securities watchdog expects audit deal soon with U.S. regulators [Reuters] “I’m very confident that we will reach an agreement in the near future, so that PCAOB could conduct checks on Chinese accounting firms in China in a reasonable way,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), said at the annual Boao Asia Forum, referring to the Public Company Accounting Oversight Board, the U.S. audit regulator.

PCAOB talks to audit committee chairs about auditor oversight in 2021 [JD Supra] Since 2019, as part of its strategy of enhancing transparency and accessibility through proactive stakeholder engagement, the PCAOB has been engaging with audit committee chairs at U.S. public companies that have had audits inspected by the PCAOB during the year. The PCAOB staff continued this outreach to audit committee chairs during 2021, engaging in conversations with over 240 audit committee chairs. The results are discussed in this new report.

Photo by Jennifer Ramos Rossi

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