Footnotes is a collection of stories from around the accounting profession curated by actual humans and published every Friday at 5pm Eastern. While you’re here, subscribe to our newsletter to get the week’s top stories in your inbox every Tuesday and Friday. See ya.
The Market
Accounting firms question the partnership model [Financial Times]
Several US accounting firms have taken investments from private equity groups to pay for acquisitions. “Private equity has cheque-writing privileges that a partnership doesn’t have,” said Allan Koltin, an accounting sector M&A adviser. “We are also seeing wealth management firms buying up accounting firms using cash in hand. You can’t compete without capital.” A corporation able to retain more of its annual profits could more quickly build up a war chest or show a record of earnings that could allow it to raise debt. It can also make big decisions faster, said Koltin. “While most firms boast about their love for the partnership model, they often get frustrated with the dysfunctionality of decision making,” he said. “As firms grow, rank and file partners can’t be consulted all the time on most major strategic moves. Firms need to be built for speed if they are to excel and compete.”
CFOs stuck between short-term costs, long-term goals: EY [CFO Dive]
CFOs grappling with economic headwinds are stuck between prioritizing short-term costs and long-term gains, a survey released Wednesday by Big Four accounting firm Ernst & Young found. Seventy-six percent of CFOs say the macro environment is putting pressure on them to hit short-term earnings targets, with 50% saying they are achieving this by reducing funding for areas they view as long-term priorities — areas which include ESG, technology, and talent and culture. Balancing short-term and long-term performance is also leading to some strain within the C-suite, with 67% of financial leaders acknowledging there are “tensions and disagreements” within the leadership team on how to do so.
This is “translating into a lack of clarity in what gets reported, which then gives investors concerns, which (in turn) puts more pressure” on CFOs and the leadership team, said Myles Corson, global strategy and markets leader, financial accounting advisory services for EY.
AI
‘The ability to innovate is not going to come from AI, it will come from humans,’ says Deloitte exec [Arab News]
AI is growing exponentially across the world, but its growth in the Middle East region is particularly noteworthy. Earlier this year, Saudi Arabia ranked second globally for societal awareness of AI, according to the 2023 AI Index Report by Stanford University. “We decided that it is absolutely imperative for us to think about bringing that kind of talent, capability and entire mindset to our Middle East clients and bring the Deloitte AI Institute right here to our region,” said Yousef Barkawie, AI and data leader, Deloitte Middle East. “Just like anything, the topic of AI can be highly localized,” he added, explaining that every country has its own unique set of challenges and objectives, which could benefit from the use of AI.
Number of Canadians using GenAI could create risks for employers, KPMG survey reveals [Regina Leader-Post]
One in five Canadians is using generative artificial intelligence (GenAI) tools to help them with their work or studies, according to a new study by KPMG in Canada released Tuesday at Collision 2023 in Toronto, however, not is all rosy. Findings revealed that while many users are seeing a boost in productivity, there is a need for strong organizational controls and policies, as some users are entering sensitive data into their prompts, not verifying results, and claiming AI content as their own. With the increased capabilities provided by generative AI tools, KPMG created Canada’s first-ever Generative AI Adoption Index, which measures how, when, and why Canadians are using generative AI tools in the workplace and at school, in order to analyze the risks and benefits to organizations and society.
Talent
At Bryant, PwC institute immerses high schoolers from diverse backgrounds in accounting [Bryant University]
The stakes are high for the team of high school students participating in the PwC Accounting Careers Leadership Institute (PwCACLI). Their future is literally laid out in front of them. Fortunately, though, they have some help. The group is engaged in a competitive, interactive workshop where they race against other PwCACLI teams to plot a potential path to career success from accounting intern to partner, learning the ins-and-outs of the profession and how to thrive in it. Every step of the journey, PwCACLI mentor Leandro Moro ’21, ’21 MPAC-Tax, one of several student and professional mentors for the program, is there to offer the team advice and encouragement — and to celebrate with them when their “promotions” are announced. The game, says Moro — who himself took part in the PwCACLI as a high school student, returned as a student mentor during his time at Bryant, and now works as an experienced tax associate for PwC — isa microcosm of what makes the week-long overnight program special.
Rising accounting star [Quinlan School of Business]
In the 14 years since former Loyola men’s basketball player Andrew Coombs (BBA ’09) graduated with a Quinlan School of Business degree in accounting, he has become a force in the consulting industry. After gaining experience across multiple accounting and auditing firms in the New York area, including time at Ernst and Young, Coombs created his own business, Coombs CPA, PC, in New Jersey. Since its creation in 2018, his firm has gained nearly 1,000 clients including individuals, nonprofits, real estate developers, private equity firms, and manufacturers. His efforts have brought him and his business numerous accolades, including being named the 6th most powerful CPA in the state by NJBiz Magazine in 2023.
Guiding career paths for skilled graduates [Irish Examiner]
The Deloitte graduate programme is underpinned by a central purpose — to make an impact that matters for the firm’s people, clients, communities, and the planet. A buddy is assigned to all graduates, this is a current graduate that has been with the organisation and will help them to settle into their business service line. “Our new graduates are also paired with a coach upon joining, this is a seasoned professional from our management team that will mentor and foster their learning and development during their graduate journey,” explains Jennifer Gallivan, head of talent acquisition, Deloitte. “This coaching model ensures our graduates are consistently benefiting from feedback and the experience of their coach.”
Why South Africa is facing a talent shortage in the auditing industry [News24]
South African corporates and audit firms are experiencing a significant talent and skills shortage as youngsters find the industry uninteresting, and international audit firms poach local talent. As the demand for auditing services continues to grow locally and globally, firms face the challenge of finding qualified professionals to fill key roles. The advisory board member at Makosi, Bill Tomazin, said: “One of the primary reasons for the shortage is the lack of interest among younger generations. “Many students are not pursuing careers in auditing, as they view it as a less exciting or less innovative industry. This has led to an aging auditing workforce, with many professionals nearing retirement age.”
SEC
SEC Continues to Focus on SPAC Market [JD Supra]
In recent years, the U.S. Securities and Exchange Commission (SEC) has had its eye on the special purpose acquisition company (SPAC) market — warning investors against putting money into SPACs, expressing skepticism about their performance, and taking affirmative steps to corral SPACs, including direct prosecution of investment firms. Now its gaze has turned upon a market gatekeeper.
Yep, Still Talking About That PwC Thing
How PwC captured Australia [UnHerd]
PricewaterhouseCoopers claims it was created to fulfil one purpose: “To build trust in society and solve important problems”. Inevitably, its mission statement contains a list of platitudes explaining how it hopes to achieve this; among them is the insistence that employees should “act as if our personal reputations were at stake”. Whether or not this commandment was ever read out in its Australian HQ — and the evidence suggests it was not — it certainly now makes for uncomfortable reading. In May, accusations that had been bubbling under the surface since late last year exploded into the headlines. Between 2013 and 2015, PwC Australia allegedly advised the government on how to design a system to get more tax out of multinationals — and then used its insider knowledge to advise corporate clients on how to dodge the very same measures.
Audit
TrueUSD’s Reserves Were Attested by Former FTX.US Accounting Team [CoinDesk]
Armanino’s digital asset team rebranded itself to The Network Firm, as CoinDesk reported, to continue performing audits and attestations after the collapse of FTX. CoinDesk previously reported that in 2019, the Public Company Accounting Oversight Board highlighted deficiencies in Armanino’s quality-control processes, and the firm later faced controversy for its audit of Lottery.com, which overstated its cash balance by $30 million and improperly recognized revenue, leading to Armanino’s resignation in September before a class-action lawsuit against Lottery.com’s executives. Executives at Archblock, which supports the TrueUSD stablecoin, have previously endorsed the Armanio team in prior emails to CoinDesk and said they would continue to use The Network Firm. “The firm may be new, but the partners have been working in the industry for a long time, and many of the team members were part of the initial attestation engine,” Archblock’s Chief Financial Officer Alex de Lorraine previously told CoinDesk.
Getting to Know Leaders
PwC’s Tim Ryan ‘kick-starts’ his day with 75 push-ups, 600 sit-ups, and running 3 miles in under 22 minutes [Fortune]
Finally we get to know what Tim Ryan has for breakfast.
Carmine Di Sibio picks Dutch-Oz electro as EY break-up hype-track [Consultancy.uk]
Independent economic think tank the Milken Institute has released a fascinating new research study on leadership – or, more specifically, the music that senior business leaders listen to to get into the zone, including the distinctively diverse ‘hype tracks’ of global EY CEO Carmine Di Sibio and Oliver Wyman’s vice chair Huw van Steenis, along with the first choice selection of Deloitte’s US chief marketing officer Margaret Anderson and others. In terms of Ernst & Young’s outgoing chief Di Sibio, it’s naturally tempting to explore the lyrics of his preferred pre-boardroom aural excitations in an effort to gain further insight into the serious tensions that must’ve surrounded the firm’s failed split-bid, but – “I’m tryna get it poppin’, each and every way / It’s one nation under goons / My goons are strippin’ all these cats down to their Underoos” – doesn’t offer much in the way of any immediate enlightenment.
