Note: We’re skipping Footnotes next Friday to unveil a surprise. Footnotes will return as scheduled on November 24.
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.
Big 4
People over profits: ‘Don’t promote leaders unable to manage, develop staff’ [Australian Financial Review]
The driving force behind a landmark report into the culture of EY says leaders should not be promoted further if they cannot manage and develop staff – even if they perform well financially for the firm. Former sex discrimination commissioner Elizabeth Broderick also told the ongoing Senate inquiry into consultants that “most professional services firms have a culture of long working hours” because of their time-based billing systems. “The area where I see a lot of overlap is in lack of psychological safety… [Dr Switkowski] pointed to a number of areas where people, if they’d felt safe to speak out, some of these issues might not have ended up where they did,” she said during the Thursday-night hearing in response to a question from Labor senator Helen Polley. “I think we saw very much that similar issue at EY, particularly where people weren’t speaking up about sexual harassment or racism or indeed, most importantly, the long working hours culture. I think the analysis that is in that [PwC] report, as well as the analysis in our report … are useful learnings across the whole sector.”
Government defends hiring consulting firm KPMG to find ways to save money [CBC]
“There are times when you actually need an external perspective to help you to think about how to find cost efficiencies … There are times where organizations are actually used to doing things in a certain way and an external perspective can help you find efficiencies,” Natural Resources Minister Jonathan Wilkinson told reporters Tuesday on his way into cabinet. “And that was what this was all about, to actually help us reduce costs.” Wilkinson’s comments came in the wake of news reports saying the government paid KPMG nearly $670,000 to find ways to save money — and after the the Trudeau government announced an initiative to tighten spending and reduce its reliance on outside consultants.
PwC Vice Chairman Offers Career Advice From His 30 Years Of Experience [Forbes]
TLDR:
AI in Accounting
Generative AI revolution: How auditors are leading the way [Journal of Accountancy]
As accounting firms get more comfortable with using AI to supercharge and streamline their audit capabilities, companies are relying on external auditors to smooth the tech-driven transition. “Financial reporting leaders, but also investors, regulators, and other stakeholders in the capital markets expect AI to drive audit quality. They also expect auditors to understand and evaluate processes and controls, analyze transaction-level data for anomalies, and test more data in real-time,” said Scott Flynn, KPMG vice chair—Audit, in a news release. “Considering both the scope and scale of AI’s impact on financial reporting, enhancing audit quality by using technology to stay ahead of emerging risks is expected.”
Deloitte brings GenAI to internal audit, accounting professionals with new bot [CFO Dive]
Big Four accounting firm Deloitte recently launched an internal, GenAI-driven chatbot — known as DARTbot — which can allow its 18,000 audit and accounting professionals to ask and receive answers to complicated accounting questions in a conversational way. “So as a professional in the field is doing research on a particular topic and in the course of a client engagement, they can use this tool to help them respond to those types of inquiries, or to assist in the audit process,” Will Bible, digital transformation and innovation leader, audit and assurance for Big Four accounting firm Deloitte said.
PwC’s $1B Investment Will Give Every Worker AI Training—And Staffers Access To Chatbot Assistants [Forbes]
It was during Davos, back in January, when the texts about AI really started flying. Joe Atkinson, PwC U.S.’s chief products and technology officer, recalls getting messages from his U.S. chair, Tim Ryan, saying they’d have to talk about generative artificial intelligence when he returned from the Switzerland confab. “There’s probably not a technology development I’ve seen in 30 years that has a greater fear of missing out in the C-suite than this one,” Atkinson recalls, saying while PwC had been researching and working with AI for years, ChatGPT helped “capture the imaginations” of executives outside of tech.
Parliamentary committee reminds parties to verify submissions generated by AI [The Mandarin]
A powerful parliamentary committee has said it expects submitters who use large language models (LLM) and other artificial intelligence tools to ensure the output is truthful, following complaints from two major accounting firms about a recent academic submission. The Parliamentary Joint Committee on Corporations and Financial Services issued a statement setting out its expectations for truthfulness last week after two major accounting firms wrote to correct errors made in a submission lodged by academics. Errors made by the academics included failing to identify the correct firm as the auditor — both Deloitte and KPMG had been named as auditors of entities that are audited by PwC — and there were scandals manufactured in the artificial intelligence output. The academics responsible had apologized for the multiple errors resulting from the reliance on artificial intelligence engines in a letter sent to the committee by Emeritus Professor James Guthrie.
See also:
Academics Let AI Ruthlessly Slander Big 4 Firms, They’re Very Sorry They Didn’t Think to Fact Check
Talent
Don’t slack on hiring tax talent, pre-game your busy season and be ready with a fully staffed team when things get crazy. Now’s the time so check out Accountingfly’s top remote accounting candidates of the week.
Top Remote Accounting Candidates of the Week: November 9, 2023
How frontline staff reflects your brand [Accounting Today Voices]
I was in another accounting firm’s lobby the other day waiting for my meeting to start. Going through my notes, I couldn’t help cringing as I overheard the firm’s disgruntled receptionist answer the phone. She handled about a dozen calls in the five minutes I was there and her attitude was terrible every single time. In the five minutes I sat in the lobby, I heard her bad attitude repeated a dozen times. I’m sure callers — many of whom were likely clients — couldn’t wait to get off the phone with her. Even worse, think about how many bad impressions of the firm she probably left over the course of a day and a week? When I mentioned the receptionist’s attitude to the firm’s leadership that day, they had no idea what I was talking about. They assumed the receptionist’s job entailed nothing more than routing calls. They viewed it as a low-level administrative role that should cost them as little as possible.
Salaries and Compensation
KPMG slashes bonuses again as dealmaking fees dry up [City A.M.]
KPMG has slashed bonuses for its UK deals team again today in the latest sign of strains facing the firm after a drop off in dealmaking this year, City A.M. has learned. The Big four firm already cut payouts for the deals division by around half in May but today informed the team bonuses would be slashed further, a source told City A.M. Staff in the division were told in an email today bonuses would be “lower” but were not given a figure that it would be reduced by, the source said. Earlier in the year, KPMG told its staff that annual discretionary bonuses will be lower than in years of growth. A KPMG UK spokesperson, said: “A challenging economic environment has driven a softening in a number of markets, including Deal Advisory.”
Tight Job Market in Finance/Accounting, Professionals Settle In After Years of High Turnover: Addison Group [Staffing Industry Analysis]
Employers looking at hiring finance/accounting professional face a tight job market, according to the 2024 Workforce Planning Guide released by Addison Group. The 2024 report details the talent situation in finance/accounting. It also lists the US national average salaries, with CFOs reaching $261,739.
Some of the most highly paid finance roles include CFO, VP of finance and FP&A director:
- CFO, $261,739
- VP of finance, $222,107
- FP&A director, $207,069
- FP&A manager, $156,855
- Senior financial analyst, $112,415
Examples of accounting roles with the highest salaries include:
- Chief accounting officer, $227,071
- Controller, $191,885
- Assistant controller, $165,753
- Director of corporate accounting, $156,664
- Director of financial reporting, $179,490
BDO partner pay drops on higher spending and new hires [Financial Times]
Partners at BDO have had their pay cut for a second year running after higher spending and new additions to the firm’s top ranks dented their earnings. The UK’s fifth-largest accounting firm by revenue handed partners an average of £609,000 before tax for the 12 months to June, a drop of 6 per cent compared with the previous year. The firm attributed the fall in partner pay to heavier spending on staff and technology, as well as an increase in overall partner numbers, whose top echelon share in the firm’s profits. BDO hired or promoted 61 new partners in the year, taking its partnership headcount to a record 441, of which 320 are equity partners with a stake in the firm.
Firm Watch
Plante Moran Names New MP [INSIDE Public Accounting]
Southfield, Mich.-based IPA 100 firm Plante Moran (FY23 net revenue of $1.01 billion) has elected Jason Drake as its next MP. When Drake officially takes over as the firm’s eighth MP on July 1, 2024, he will succeed Jim Proppe, who has held the position for the last seven years. “There are a variety of reasons why the partnership selected Jason as managing partner – from his vision for the future, experience in multiple service lines and international experience, to his deep relationships and connections with firms and colleagues around the world,” says Proppe. “Jason is an inspiring colleague and an outstanding mentor, and we know he’ll continue to do great things for the firm.”
Sikich Expands in Northeast Ohio with Acquisition of Thornhill Financial [PR Newswire]
Sikich announced today that it has signed an agreement to acquire the operating assets of Thornhill Financial, LLC, a Cleveland-based accounting firm that provides tax, audit and financial advisory services.
Sax LLP continues growth with addition of six partners in multiple advisory sectors [ROI-NJ]
Parsippany-based accounting firm Sax LLP, a top 100 accounting tax firm, recently announced its continued growth with the appointment of six new partners – Joseph Bulger; Rory Cahill; Julio Jimenez; Mateo Perezrodriguez; Peter Scalise; and Eric Lewandowski. The additions expand Sax’s areas of expertise so the firm can continue to provide clients with the necessary consultative services to help grow their businesses.
CohnReznick Names New Chief People Officer [INSIDE Public Accounting]
New York-based IPA 100 firm CohnReznick LLP (FY23 net revenue of $920 million) has brought on Kimberly Kilkenney as a principal and its new chief people officer.
Whitley Penn Admits Eight to Partnership [INSIDE Public Accounting]
Fort Worth, Texas-based IPA 100 firm Whitley Penn LLP (FY22 net revenue of $189.6 million) has admitted the following eight professionals to its partnership: Robert Allen, forensic, litigation and valuation services; Justin Dailey, audit; Evan Green, audit; Jeff Howard, client accounting and advisory services; Jackson Jones, audit; Emily Landry, tax/client accounting and advisory services; Hudson Marx, tax; Adam Menzer, tax
Weird
Bizarre 911 call, police involvement new elements in Bay City tax service saga [ABC12 (Michigan)]
The mystery over a Bay City tax service that has left customers without filed taxes now includes police involvement and a bizarre 911 call. Customers of the Falasz Tax and Accounting company say they’re upset because the company didn’t file their taxes on time in April and then missed the October extension date. One customer says their business tax documents haven’t been filed since 2019. The 911 call was made from the home of Thomas Falasz, the owner of the accounting company in question. The call was about an assault that police believe never occurred. While the police were there, the officers did talk to them about a complaint over this tax issue. “Says there was a white male who was in the rafters of her roof ceiling, and dropped out of the rafters and sprayed her husband, Thomas Falasz, with an unknown liquid,” a dispatcher can be heard saying in 911 audio. A reference was made that the alleged assault most likely took place because their accounting firm appears to have closed, leaving many of its customers with unfiled taxes.
Tax
National Taxpayer Advocate Erin M. Collins Receives Prestigious Award for Lifetime Achievement in Tax [Taxpayer Advocate Service]
The Taxpayer Advocate Service (TAS) is pleased to announce that the California Lawyers Association Taxation Section has selected National Taxpayer Advocate Erin M. Collins to receive its prestigious Joanne M. Garvey Award. The award honors and recognizes Collins’ distinguished career and notable contributions in the field of tax law. Collins has 38 years of experience in tax law, spanning 15 years in the IRS Office of Chief Counsel, 20 years at the accounting firm of KPMG LLP, and over three years as the National Taxpayer Advocate. At KPMG, she represented thousands of individuals, partnerships, small companies, and corporate taxpayers on technical and procedural tax matters.
IRS provides tax inflation adjustments for tax year 2024 [IRS]
The Internal Revenue Service today announced the annual inflation adjustments for more than 60 tax provisions for tax year 2024, including the tax rate schedules and other tax changes. Revenue Procedure 2023-34 (PDF) provides detailed information about these annual adjustments.
Regulation
Smaller firms slam accounting regime as ‘useless’ [Australian Financial Review]
Smaller accounting firms say the current regulatory regime is useless and riven by conflicts of interest between the major professional bodies and the larger firms. The larger firms counter the system is working well, revealing a split as parliament considers an overhaul of the overlapping system of government and self-regulation following the PwC tax leaks scandal. But Top 100 Accounting Firms’ leaders were united on one matter: the growing amount of regulation and red tape imposed by government bodies is needlessly increasing costs and hitting their productivity, they say.
PCAOB Slows Down Standard-Setting and Rulemaking Activities [Thomson Reuters]
Except for one rulemaking item regarding follow-on disciplinary proceedings, the Public Company Accounting Oversight Board (PCAOB) has pushed back the timeline for advancing its standard-setting and rulemaking projects from 2023 to 2024, according to updated agendas revealed on November 1, 2023. In the update, the PCAOB added a new project—communication of critical audit matters (CAMs)—to its research agenda. The board also added a new standard-setting project on inventory to its mid-term agenda.
News
Apple suffers setback in fight against EU’s $14 billion tax order [Reuters]
An EU tribunal made legal errors when it ruled in favour of Apple over a 13-billion-euro ($14 billion) tax order and should review the case again, an adviser to Europe’s top court said on Thursday, in a potential setback for the iPhone maker. The tax case against Apple was part of EU antitrust chief Margrethe Vestager’s crackdown against deals between multinationals and EU countries that regulators saw as unfair state aid. The European Commission in its 2016 decision said Apple benefited from two Irish tax rulings for more than two decades that artificially reduced its tax burden to as low as 0.005% in 2014.
Italy judge seizes 780 mln euros from Airbnb in tax probe [Reuters]
An Italian judge has ordered the seizure of 779.5 million euros ($836.40 million) from short-term rentals platform Airbnb’s European headquarters in Ireland for alleged tax evasion, Milan prosecutors’ office said on Monday. The probe concerns Airbnb’s alleged failure to withhold 21% of landlords’ rental income and pay it to Italian tax authorities, as required by a 2017 law, prosecutors in the northern Italian city said in a statement. Three people who held managerial roles between 2017 and 2021, the period covering the alleged violation, are under investigation and are jointly targeted by the money seizure order, the statement added.
Mississippi Return Preparers Found Guilty of Tax Fraud [Department of Justice]
A federal jury in Jackson, Mississippi, convicted Adam Earnest, Christopher Randell and James Klish yesterday of conspiracy to defraud the United States. Earnest and Randell were separately convicted of individual counts of preparing false tax returns. According to court documents and evidence presented at trial, Earnest, Randell and Klish worked at Sunbelt Tax Services, a return preparation business with a primary office located in Jackson,. Earnest, Randell and Klish conspired together and with others at Sunbelt Tax Services to fraudulently claim inflated tax refunds for clients by reporting false education credits, itemized deductions and business profits or losses. Earnest and Klish also created at least four tax returns for some of their clients claiming false items.
Education
Accounting for the Two-Year Schools [Madison Area Technical College’s The Clarion]
While I acknowledge the challenges within the accounting field, I believe that having a firm understanding of accounting fundamentals is necessary for success, especially with the uncertainty of today’s economy and the essential need for accountants in not just financial industries but every industry. I’ve been told that accounting is a “Lego-block” profession, which can be attached to many different types of fields because no matter what sector of work you choose, everyone needs someone to manage their finances. So, I’m proud to be on the pathway towards becoming a CPA!
Career Moves: Zach Sellers ’24 navigated a path to EY through Career Services [Elon University]
Zachary Sellers ’24 is an accounting major and North Carolina native. Sellers’ story is a testament to resilience, adaptability and the transformative power of career services. In his sophomore year, he recognized that psychology wasn’t his true calling and sought the guidance of business advisor Chris Baker, who played a pivotal role in helping Sellers align his major and professional certifications with his career aspirations. Sellers’ goals shifted from clinical research to aspiring to become a chief financial officer. Encouraged by Baker, he connected with his current advisor, Patty Cox, in the accounting department and shifted to an accounting major.
“I’m cared for here as a student at The Citadel”: Meet Marine Corps veteran student Stuart Barickman [The Citadel]
In honor of Veterans Day on Nov. 11, The Citadel is featuring some of the college’s outstanding veteran and active-duty students representing different branches of the U.S. Armed Forces. There are more than 330 veterans and active-duty students currently studying at The Citadel as either undergraduate or graduate students. Stuart Barickman is a veteran and undergraduate student at The Citadel. After retiring from the Marine Corps, he chose to pursue a degree in Business Administration. In addition to being a full-time student, Barickman also interns at Jackson Hewitt. He hopes to pursue a career in accounting after graduation.
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